Lending data belies fears of recession

Welcome to the first Lending Zone of 2012 and the year is already shaping up to be a bumpy ride. With gross domestic product falling by 0.2% in Q4 many are predicting further quantitative easing in February and saying that the UK is already in recession.

Obviously we’ll have to wait for the data for Q1 2012 before anyone can definitively say the country has double dipped and is back in recession, but it all adds to an air of market gloom.

Bank of England governor Sir Mervyn King tried to cheer everyone up with his line that there was no reason to despair and that all crises come to an end. But that’s the economic equivalent of telling someone who has just been dumped by his girlfriend that there’s more fish in the sea.

King trying to cheer us all up is the economic equivalent of telling someone who has just been dumped by his girlfriend that there’s more fish in the sea

So what impact will all this bad news have on the UK’s housing market and lending figures? In the run-up to December, lenders that we spoke to widely expected to take a seasonal break from the middle of the month. But anecdotal feedback showed both lenders and brokers to be unseasonally busy. And this seems to be borne out by the British Bankers’ Association’s December lending figures.

At a time when the economy was contracting in December there was £9bn of gross lending, 12% higher than the same period in 2010. This was also a 7% increase on the £8.4bn lent in November 2011 and is 10% higher than the previous six-month average of £8.2bn.

While not fantastic it is encouraging, especially remembering the bad news on Europe and economic Armageddon that dominated Q4 2011.

Unless people have their lives turned upside down by the loss of their job most will carry on spending, albeit in a reduced way. Upbeat retail figures over Christmas seem to bear this out.

This makes one wonder whether consumers, like committed smokers who ignore cancer warnings on cigarette packets no matter how lurid the message, have become immune to the daily bleating of the economic prophets of doom. “King trying to cheer us all up is the economic equivalent of telling someone who has just been dumped by his girlfriend that there’s more fish in the sea”