Potential credit problem in UK could see some macroprudential controls from BoE FPC

Consumer credit in UK is growing at over 9% 3mth pa, a pace not seen since 2005 and notably faster than the pace immediately before the financial crisis broke. Mortgage borrowing, the much larger component of household borrowing, is rising at a more sedate 3.3% 3mth p.a. but is also picking up.

The bulk of the growth in this component is in buy-to-let, an area which experiencing a surge ahead of the increase in stamp duty on such properties coming into effect in April.  We should thus expect further acceleration in mortgage borrowing and as such a strong increase in net consumer credit.

"This further strengthening of credit trends will not be a surprise to the Bank of England FPC but it will reinforce the willingness to introduce some macroprudential controls to prevent this getting out of hand. " said Societe Generale in a report.