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Bank worried by continuing consumer demands

23 November 2003
The governor of the Bank of England, Meryvn King, has voiced renewed fears concerning high levels of household and consumer debt after figures revealed a record rise in lending and a further spurt in retail sales last month.

Mr King was forced to concede to a parliamentary committee that attempts to stifle consumer spending and rising house prices through an increase in interest rates had not been as affective as envisaged.

The Council of Mortgage Lenders announced this week that gross lending in the UK reached £27.5bn in October, 8 per cent higher than September's figure and 31 per cent more than October last year, while the British Bankers Association said mortgage borrowing shot up by a record £6.1 billion in October, before this month's interest rate increase.

While many are taking these latest reports as evidence for future rate increases by the MPC, Mr King told the Treasury select committee that it was important for the committee to examine further how debt was spread through the economy in order to see the impact of higher rates more clearly.

The need for caution emphasised by Mr King was echoed in the minutes of the MPC's meeting released this week during which the decision to increase the base rate by a quarter of a percentage point was taken.