Unsecured lending remains weak 

Mortgage approvals for house purchase jumped to an 18-month high in September but unsecured lending remained weak and the Bank of England's preferred gauge of money growth fell at a record pace. Skip related content

The Bank will decide whether to extend its quantitative easing programme next week, and the continued weakness in bank lending could support the case to pump more money into the economy.

Headline M4 broad money supply grew 0.8 percent in September for an 11.6 percent annual rise. But the central bank's preferred measure -- which strips out flows to non-bank financial intermediaries such as clearing houses -- contracted 0.9 percent on the month and by a record annualised rate of 1.7 percent in the third quarter.

Since March Britain's central bank has spent almost 175 billion pounds of newly created money buying assets -- mainly government bonds -- in a bid to boost the money supply and kick-start growth.

"Despite the improved headline figures, the breakdown of the M4 money supply and lending data for September is not so encouraging," said Howard Archar at Global Insight.

"Ongoing muted bank lending to companies, in tandem with the economy unexpectedly continuing to contract in the third quarter, puts serious pressure on the Monetary Policy Committee to further extend their quantitative easing programme at their November meeting."

Data last week showed the economy shrank by 0.4 percent between July and September, quashing hopes the downturn was ending and instead marking the longest recession since record began more than 50 years ago.

Swayed at least in part by that data, around two-thirds of economists now expect the Bank to extend it QE programme next week, probably by at least 25 billion pounds, according to a Reuters poll.

Mortgage approvals for home purchase, a lead indicator of housing demand, rose more than expected to 56,215 in September from 52,970 in August.

But total consumer credit remained subdued as consumers repaid debt for a third consecutive month, although the repayment of 262 million pounds was slightly less than in August and July.

Consumers borrowed a net 79 million pounds on their credit cards in September, the lowest amount since last December.

"The recovery in housing market activity may still have a bit of life in it, but the weak money supply figures bolster the case for more QE next week," said Vicky Redwood of Capital Economics.

"While the monthly figures can be volatile, it is clear that money growth is still well below rates needed for a decent economic recovery," she added.