November 29, 2019 11:26:08 AM
The pace of consumers’ non-mortgage borrowing has accelerated for the first time in over a year, Bank of England figures show.
Economists said it remains to be seen whether the pick-up was a “blip”.
Consumer credit, which includes borrowing using credit cards, personal loans and overdrafts, increased by 6.1% annually in October, up from 5.9% in September, the Bank’s Money and Credit report said.
A few years ago, annual growth in consumer credit was in double digits – sparking fears some households could be at risk of overstretching themselves.
The report said: “This is the first increase in the annual growth rate since June 2018, but it remains considerably lower than its post-crisis peak of 10.9% in November 2016.”
The Bank’s figures also show the extra amount borrowed by consumers to buy goods and services increased to £1.3 billion in October – which is above a recent average of £1.1 billion.
Howard Archer, chief economic adviser at EY ITEM Club, said: “It remains to be seen if October’s modest pick-up in unsecured consumer credit growth is a blip or the start of an upward trend.
“The overall slowdown in consumer credit growth has clearly been significantly affected by markedly weaker private car sales as this has reduced demand for car finance.
“October’s modest pick-up in unsecured consumer credit growth came despite evidence of slower consumer activity.
“Retail sales volumes dipped 0.2% month-on-month in October, having been only flat in September.
“Additionally, private new car sales slumped 13.2% year-on-year in October.”
Mr Archer said several surveys have indicated that consumers have recently become more concerned “by the combination of a struggling domestic economy, heightened domestic political and Brexit uncertainties and a deteriorating and more fractious global economic environment”.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said October’s increase in unsecured credit “suggests that consumers still are upbeat enough about the medium-term outlook for their personal finances to borrow more”.
The figures also show 64,602 mortgage approvals were made to home buyers in October – marking a seven-month low.
Despite the fall in mortgage approvals, the report said they remain within the narrow range seen over the past two years.
Mr Tombs continued: “October’s drop in mortgage approvals looks like the type of stutter usually seen before general elections.”
He said approvals are expected to rebound early next year “when political uncertainty should have declined and support from low mortgage rates should still be in place”.