Annual growth in consumer credit slowed to five-year low in May

Annual growth in consumer credit slowed to a five-year low in May, Bank of England figures show.

Consumer credit, which includes borrowing using personal loans, overdrafts and credit cards, increased by 5.6% annually in May, slowing from 5.9% in April.

It was the lowest rate since a 5.5% increase in April 2014.

Howard Archer, chief economic adviser at EY ITEM Club, said the slowdown coincided with weakened retail and private car sales.

He said: “The overall impression remains that (consumers) have become relatively careful in their borrowing amid concerns over the economic outlook.”

Mr Archer continued: “It should also be borne in mind that consumer credit growth has recently been limited by markedly weaker private car sales, as this has reduced demand for car finance.”

Lenders have also become more cautious about handing out non-mortgage credit, he said.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said relatively low mortgage rates are helping to support households’ disposable incomes.

Meanwhile, cautious households shored up money held in deposits by £6.5 billion in May – the biggest amount seen since 2016.

The Bank’s Money and Credit report said: “Household deposits increased by £6.5 billion in May, the largest amount since September 2016.

“This reflects greater flows into non-interest-bearing deposit accounts.”

The number of mortgage approvals made to home buyers fell back to 65,409 in May, from 66,045 in April.

The report said the number of mortgage approvals for house purchase remained broadly in line with the range seen in previous years.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said the figure “shows that the mortgage market is trundling along quite steadily with no great shocks either way.

“This is reassuring as there is plenty of political and economic uncertainty, which is preying on people’s minds and creating a delay when it comes to making big decisions.

“Lenders remain keen to lend and several have cut rates in recent weeks so mortgage rates are likely to remain low for a while yet, further supporting the market.”

Andrew Montlake, director of mortgage broker, Coreco said: “It’s by no means firing on all cylinders but the mortgage market is moving along at a respectable pace.”