Lending Figures Leave People Brutally Exposed

12.00.00am UTC (GMT +0000) Wed 29th Oct 2003

Commenting on this morning's Bank of England lending figures, which show record rises in borrowing, Vince Cable MP, Liberal Democrat Shadow Chancellor, said: "With lending figures at these record levels, people would be brutally exposed if there were a serious downturn in the housing market. All the indicators are dangerously similar to those at the time of the last house price collapse in the early 1990s."

"The house price bubble is fuelling consumption and keeping the economy going."

"The lending boom may be convenient for Gordon Brown in balancing his books, but is time the Government took action to protect ordinary homeowners against irresponsible lending."

ENDS

Notes to editors

Today's figures show overall seasonally adjusted lending up on the month, on three months and on the year - driven by higher borrowing secured on dwellings. Net lending secured on dwellings is up 36% on the year, gross lending up 65%. Overall lending to individuals is up 14% on the year.

There are four worrying signals for the housing market:

1. 50% of mortgage borrowers are borrowing over three times their

income - the highest ever (Council of Mortgage Lenders, 20/10).

2. Less than half of all mortgage lending is now for new house

purchases - almost half is remortgaging for spending elsewhere (Council of Mortgage Lenders, 20/10).

3. The ratio of debt to income is now 120%, compared to 100% at the height of the Lawson boom (Bank of England Quarterly Bulletin Autumn 2003).

4. The ratio of house prices to income is now 160%, a similar level to the ratio just before the collapses in house prices in the early 1990s (BoE Quarterly Bulletin Autumn 2003).

Vince Cable MP has been warning for over a year that the Government, Bank of England and Financial Services Authority need to address aggressive and irresponsible lending by some of the leading commercial banks. The FSA and Bank of England need to take responsibility for ensuring that lending institutions are not taking excessive risks with consumer and commercial lending against property prices - to avoid a Japan-like situation of a collapse in asset prices.