By Jason Douglas And Nicholas Winning
LONDON--Lending to households in the U.K. rose in July to its
highest monthly total in six years, a sign that low interest rates
and a fast-growing economy are reviving Britons' appetite for
borrowing.
Bank of England data Monday showed Britons borrowed a total of
GBP3.4 billion ($5.6 billion) in July, net of repayments, the
highest monthly total since July 2008, and higher than the GBP2.8
billion borrowed in June.
Net mortgage lending was GBP2.3 billion, also the highest since
mid-2008. The number of new home loans approved dipped, however, to
66,569 in July from 67,085 a month earlier, an early sign that
lending in the property market may be stabilizing following the
introduction in April of tougher lending standards.
Unsecured borrowing totaled GBP1.1 billion in July, up from
GBP700 million in June, the BOE said.
The pickup in lending should reassure policy makers that housing
and consumer spending will continue to help fuel Britain's economic
recovery. But it may also raise concerns that Britons are in danger
of taking on debts they may struggle to repay, as wage growth has
been weak.
Lending to businesses also rose in July, to a net GBP1.2
billion, after shrinking by GBP3.9 billion a month earlier.
Boosting the supply of credit to businesses, particularly small and
midsize firms, has been a key goal for BOE and government
officials.
The U.K. is expected be the fastest-growing member of the Group
of Seven leading economies this year, according to the
International Monetary Fund, fueling speculation that the BOE will
be the first of the world's major central banks to raise interest
rates after years of ultra-loose policy.
Investors expect officials led by Gov. Mark Carney to raise
rates early next year. Two of the BOE's nine-member rate-setting
panel are already pushing to lift the BOE's benchmark to 0.75% from
a low of 0.5%.
Officials have signaled that problems in the global economy may
yet throw the U.K. off course and delay interest-rate increases.
Underscoring those concerns, a gauge of U.K. manufacturing activity
published Monday by financial information firm Markit and the
Chartered Institute of Purchasing and Supply weakened in August to
its lowest level in more than a year.
The pound fell on the news, to $1.6622 from $1.6640 previously.
The euro rose to GBP0.7906 from GBP0.7890.
Robert Wood, chief U.K. economist at Berenberg Bank in London,
said tensions between the West and Russia over unrest in Ukraine
appear to be hitting the European manufacturing sector.
"Russia's escalation of the conflict in Ukraine has taken a toll
on the internationally-exposed manufacturing sector, and that
effect could yet worsen further in the coming months given recent
confidence drops in the more directly exposed core European
economies. These developments pose a serious downside risk to
growth this year and next," Mr. Wood said.
Write to Jason Douglas at jason.douglas@wsj.com and Nicholas
Winning at nick.winning@wsj.com