Big Drop in Consumer Lending

December saw the biggest drop on record in consumer lending by banks, according to figures released by the Bank of England. Lending raised steadily throughout most of 2011, dropping suddenly by £377 million in December, the biggest drop since 1993 when records began.

This drop can be explained in a number of ways and does not necessarily represent a decline in new loans going to consumer, banks may have ‘cleared out’ some loans, writing debts they are unlikely ever to recover, or sold off loan portfolios to other organisations.

It could also mean that Britons have paid back an unusually high amount of their loans, which seems unlikely so soon after Christmas, the biggest spending period of the year.

Mortgage/re-mortgage approvals went up marginally in an encouraging December, however, the relatively steady number and value of these approvals reflects the housing markets continued sluggishness and confirms that the economy has not yet fully recovered from the financial crisis..

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