Fears grow of a further collapse in consumer spending, as new figures on mortgages and personal lending are released by the Bank of England. Mortgage approvals slumped to a six-month low in August, leading some commentators to anticipate the possibility of a “double dip” in house prices.
Any fall in prices is bound to have a knock on effect on consumer spending. According to Nationwide Building Society’s August survey, prices have fallen for two months in a row. Vicky Redwood, senior UK economist at Capital Economics, said: "The housing market still appears to be weakening." Consumer confidence was high at the beginning of 2010, helping contribute to the 1.2% rebound in the second quarter of the year — the fastest growth in nine years — and a robust 0.4% pick-up in the first three months of the year. But households now appear to be tightening their belts, paying back £120m of unsecured lending in August, the Bank data showed. Credit card debt increased by £123m during the month, but it was offset by people repaying £243m more than they borrowed through loans and overdrafts.
A total of 47,372 mortgages were approved for house purchase during the month, down from 48,346 in July, as banks continued to apply strict criteria to those looking for a home loan. It was the fourth consecutive monthly decline. Approvals have run at less than 50,000 a month since December, well below the 70,000-80,000 economists consider necessary for a stable market.