Money supply in the UK, as measured by the M4 monetary aggregate, contracted at a 0.2 per cent month-on-month (0.6 per cent year-on-year) pace in April, after a decline of 2.3 per cent the month before, according to the Bank of England.

In the previous month aggregate M4, which includes all 'other financial corporations', contracted by 0.3% year-on-year. M4 lending, meanwhile, fell by 4.6% year-on-year, after slipping by 4.3% the month before.

Net consumer credit increased by £0.7bn in April after an increase of £1bn in the previous month (consensus: £0.8bn).

Mortgage approvals declined to 62,918, versus 66,563 the month before (consensus: 64,500).

Mortgage lending was £1.7bn higher in April than in March, as expected by analysts.

Lending to non-financial businesses decreased by £2.4bn over the month, to reach £441.2bn, and was 4.1% lower over the year, despite evidence that firms are now looking to increase their borrowing.

In that vein, on May 30th Barclays Research told clients that until the uncertainty regarding the introduction of new bank capital requirements (CRDIV and ECB AQR) has receded it is unlikely that credit to SMEs will expand substantially, as UK banks (and European ones) are not strapped for liquidity, but rather for capital.

Similarly, lending to small-and-medium sized enterprises (SMEs) was down 3% year-on-year in April, the same as last month, at £170.2bn.

BoE still to take further action

Commenting on the data Dr.Howard Archer, Chief European+UK economist at IHS Global Insight, said the figures "strongly suggest" that the introduction of the Mortgage Market Review (MMR) has, at least temporarily, taken some of the steam out of housing market activity.

IHS forecasts house prices will increase by around 6% over the rest of 2014, with gains across the country, followed by a rise of 7% in 2015 - which would be a modest slowdown.

However, "the Bank of England still seems to take further action to rein in the housing market as soon as at its June meeting," Archer added.

AB

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