Sharp fall in new household borrowing for car finance seen in March
The extra amount of money borrowed by consumers to buy goods and services dwindled to its lowest levels in more than five years in March, as the original Brexit deadline approached.
Meanwhile, the number of mortgage approvals made to home buyers fell back to a 15-month low, according to the figures from the Bank of England.
The Bank’s Money and Credit report showed that consumer credit increased by £549 million in March, the lowest increase since November 2013.
The weakness was largely due to a fall in new lending for car finance, the Bank said.
Consumer credit includes using credit cards, overdrafts and personal loans.
The report said March’s flow of consumer credit was “well below” the average of £900 million seen since July 2018.
The deterioration was due to weaker net borrowing for the “other loans and advances” category within consumer credit, which fell from a £757 million increase in February to £224 million in March.
The report said: “Within this, new borrowing for car finance fell sharply, alongside weaker car registration numbers in March 2019 than in previous years.”
Net credit card borrowing also weakened slightly due to households making stronger repayments – although it remained in line with its average since July 2018 – the Bank said.
Howard Archer, chief economic adviser at EY ITEM Club said: “While consumers have clearly been less affected by Brexit concerns than businesses, the overall impression remains that they have nevertheless become more careful in their borrowing amid concerns over the economic outlook.”
He continued: “Significantly, lenders have been reining in the amount of unsecured credit available to consumers and tightening their lending standards.”
The departure date for leaving the EU had been March 29, but an extension until October 31 was later set.
The Bank’s figures also show that 62,341 mortgage approvals were made for house purchase in March – the lowest figure since December 2017.
Jeremy Leaf, a north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors (Rics), said the mortgage approval for house purchase figures are “particularly disappointing at this time of year as we would have hoped and expected that demand would increase as usual in response to the busier spring period”.
He said: “On the ground, business is definitely better than it was a few months ago as buyers have emerged from extended Brexit-led hibernation and are starting to see what is available.
“On the other hand, sellers are still cautious and many are only moving if they can see a reasonable difference between the selling and buying price, even if they are not achieving what they might have previously expected.”