UK bucks the trend as European lending contracts
Published: 11 September 2013 | Author: Bernard Clarke
Lending to households in Europe has fallen in real terms for the second year running, according to statistical data published by the European Credit Research Institute (ECRI).
According to the ECRI's recently published statistical package Lending to Households, debt reduction is continuing across the continent. But the capacity to reduce debt relative to disposable income and GDP remains limited because of the "unequal and sluggish recovery." As a result, 2012 was a year "of stagnation in household credit markets" in Europe.
The fall in lending in real terms during the year followed the first historical drop recorded in 2011. The decline in aggregate housing loans in the EU illustrated long-term problems in the overall economy, the ECRI said.
In contrast, our data showed that mortgage lending in the UK increased in the last two years, albeit modestly. Gross advances totalled £141.4 billion in 2011, 5% higher than in the preceding year, and grew by another 1% to £143.1 billion in 2012.
Interest rates on housing loans in some European countries were at a record low, but the ECRI said its findings reflected lower consumer confidence and an increased strain on households' medium-term income.
While credit reduction in the EU was not as significant in 2012 as in the previous year, households in the euro area registered a bigger drop than in 2011. Within the euro area, countries at the periphery continued to reduce household debt by record levels.
The ECRI said that stagnation was also present in the "normally rather resilient" central and eastern European countries, with credit reduction extending beyond the former periphery to Poland and Slovenia, and households in Hungary, the eastern Balkan countries and the Baltic states continuing to reduce their debt exposure significantly in 2012.