Banks ‘racing to the bottom!’ – says Labour’s John McDonnell

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On July 1st 300,000 marched on Parliament after McDonnell urged them to do so – since then Labour has refused to call for the Tories to go
On July 1st 300,000 marched on Parliament after McDonnell urged them to do so – since then Labour has refused to call for the Tories to go

THE BANK of England has revealed that banks extended new mortgage commitments to borrowers worth £69.6bn in the three months to the end of September, an increase of 14% on the same period in 2016 and the highest amount recorded over a three-month period since the start of 2008.

This was despite the proportion of first-time buyers falling. Labour’s shadow chancellor John McDonnell had launched a report on Monday warning that banks are becoming increasingly engaged in a ‘race to the bottom’ on mortgages, credit cards and other consumer loans that has worrying parallels to years before the financial crisis.

The report by GFC Economics on behalf of the Labour Party said banks had diverted resources away from financing small businesses in favour of selling mortgages. The hike in lending was driven by people remortgaging their homes in order to lock in cheap deals before the Bank of England raised the cost of borrowing in November for the first time in a decade. There was almost £1.4tn of mortgage debt outstanding at the end of September, up 4.1% on the same point a year ago.

• WAGES fell behind inflation for a seventh month in a row, according to new employment figures.

The Office for National Statistics said average weekly wages rose by 2.3% in the three months to October, below inflation at 3%.

Real earnings, which take into account the cost of living, fell by 0.4% Unemployment declined by 26,000 to 1.43 million, the number of people in employment also dropped, down by 56,000 to 32 million, with men the biggest casualties of the decline.

John Hawksworth, chief economist at PwC, said: ‘Real pay levels continue to be squeezed, and we expect this to persist for at least the first half of 2018, further dampening consumer spending growth.’

Average weekly pay, excluding bonuses, reached £478 which is the lowest since February 2006. The number of people claiming unemployment benefits rose by 5,900 to 817,500 in November. Economists had expected the number of claimants, which is considered to be a potential early warning sign of an economic downturn, to rise by 3,200. The number of people employed is shrinking. In the three months from August to October, there were 32 million people working: still a lot and more than a year ago. But it is 56,000 fewer than the previous three months.