Mortgage surge not the key driver of stronger credit

Growth in long-term loans to households, which consist mostly of mortgages, has jumped since early 2015 as the property market has heated up. In contrast, growth in other loans has slowed over the same period. At first glance, this suggests that credit loosening has mostly been used to fund house purchases – raising questions over whether it has done much to boost economic activity. But the weakness in the broader loan data was caused by a shift from bank loans to bond financing by local governments. Adjusting for this, credit growth has risen fairly strongly even if mortgage lending is excluded. Our calculations suggest that mortgages account for only a fifth of the increase in total credit over the past year.