Adding to recession fears and a period of falling house prices, Bank of England data showed weaker demand for all forms of lending and consumers more than doubled the amount put into bank accounts in September. Consumers tend to cut back on spending when times are tough and according to the latest figures from Threadneedle Street Money and Credit, the amount saved rose from £3.2bn in August to £8.1bn. £ in September. Meanwhile, the number of new mortgage approvals fell from 74,422 in August to 66,789 in September as higher inflation and rising mortgage costs led to a more cautious mood among potential home buyers. The average new mortgage rate rose 0.29 percentage points to 2.84% in September, but rose more sharply in October in response to economic turmoil caused by Kwasi Kwarteng’s mini-budget. Ashley Webb, UK analyst at Capital Economics, said mortgage rates are likely to be above 5% throughout 2023. “That’s why we think house prices will fall by around 12%.” , he said. Consumer credit rose by £700m in September, up from £1.2bn in August and below the £1bn the City had expected. Webb said people are becoming more cautious as the economic situation worsened. “It could mean that households are not drawing down their savings to support spending while we wait, which is an additional downside risk to our forecast that the economy is already heading into recession.” Despite the economy’s weakness, the Bank of England is poised to respond to the UK’s current annual inflation rate of 10.1% by raising the official cost of borrowing on Thursday. The consensus in financial markets is for a rise of 0.75 points to 3%. UK inflation will be kept lower than previously predicted by the government’s energy price cap, the Office for National Statistics (ONS) said on Monday. Annual inflation, which rose in response to a quadrupling in gas and electricity prices last year, is likely to peak at around 11% before easing next year. It was previously on track to reach 15-16% without government intervention, according to many forecasts. Subscribe to Business Today Get ready for the business day – we’ll point you to all the business news and analysis you need every morning Privacy Notice: Newsletters may contain information about charities, online advertising and content sponsored by external parties. For more information, see our Privacy Policy. We use Google reCaptcha to protect our website and Google’s Privacy Policy and Terms of Service apply. Eurozone data showed annual cost of living growth for the 19 countries that use the single currency rose from 9.9% to a record 10.7% in October. The European Central Bank raised borrowing costs from 1.25% to 2% last week and worse-than-expected inflation numbers were expected to lead to further tightening going forward. Bert Colijn, senior eurozone economist at ING bank, said: “The rate of inflation jumped once again in October to a whopping 10.7%. This is partly due to higher energy consumption prices. “The low prices in the wholesale market in recent weeks have clearly not yet translated into falling prices for households. In fact, it is likely that this will only happen in a few months and even that is a big ‘if’ because it depends on uncertain factors such as the power supply and of course the weather.”
