Buoyant consumer confidence pushes up demand for credit at fastest rate in eight years in October, though UK mortgage approvals continue to fall.
Cheap borrowing costs for products like bridging loans and fierce competition on the high street fuelled a consumer credit boom in October, as buoyant demand pushed lending up at its fastest annual pace in more than eight years.
Borrowing on credit cards and demand for personal loans and overdrafts and interest free finance and point of sale increased by 6.4pc in October compared with a year earlier, according to the Bank of England, representing the fastest annual increase since July 2006.
Credit card borrowing rose by 5pc on an annual basis, while loan advances rose 7.3pc compared with a year earlier. On a monthly basis, net unsecured consumer credit rose to £1.1bn in October from £942m in September. “Consumer credit, which is probably a better signal of consumption momentum that mortgages for house purchase, continues to rise strongly,” said Rob Wood, chief UK economist at Berenberg Bank. “Consumers do not desperately want to de-lever anymore, which should help the recovery.”
“It also may well be that a significant amount of people are borrowing more due to the squeeze on their purchasing power coming from extended low earnings growth.”
Monday’s 25th November 2014 data are in line with official data released last week that showed consumer and government spending accounted for the bulk of UK growth in the third quarter.
The Office for National Statistics said household spending rose at its fastest pace in four years in the three months to the end of September, as the UK economy expanded by 0.7pc.
The Bank of England data also showed Britain’s housing market continued to cool in October. UK mortgage approvals fell to 59,426 last month, from 61,234 in September.