Annual growth in consumer credit slows to weakest levels since 2015

The annual growth rate of consumer credit - which includes borrowing on credit cards, overdrafts and personal loans - slowed to 8.5 per cent in July

HOUSEHOLDS' non-mortgage borrowing slowed to its weakest annual growth levels in nearly three years in July, Bank of England figures show.

The annual growth rate of consumer credit - which includes borrowing on credit cards, overdrafts and personal loans - slowed to 8.5 per cent in July, from 8.8 per cent in June. It was the lowest annual growth rate since November 2015.

Annual growth in consumer credit had climbed to 10 per cent in May 2016 and for much of 2016 and 2017 remained in double digits, prompting fears that some people could be at risk of over-stretching their borrowing.

Despite the slowdown, the Bank's Money and Credit Report said the 12-month growth rate remains "elevated" compared with 2009 to 2012.

Peter Tutton, head of policy at StepChange Debt Charity said: "Consumer confidence has been fragile over the summer months and this may be reflected in less demand for credit, for bigger ticket items in particular - and, with continuing economic uncertainty ahead, this lack of confidence may continue."

Howard Archer, chief economic adviser at EY Item Club, said: "The recent impression has been that consumers have become relatively cautious in their borrowing while lenders have certainly become warier about advancing unsecured credit and tightened their lending standards."

The possibility of further interest rate rises over the coming months may well be limiting households' willingness to borrow, he added.

"It is also possible that the recent modest overall improvement in real earnings growth may have reduced some consumers' need to borrow."

Mr Archer said UK house prices are expensive compared with people's incomes, typically sitting at around 5.7 times average wages - well above the long-term average seen since the early 1980s of 4.25.

Looking at mortgage lending, the report said households borrowed an extra £3.2 billion secured against their homes in July - the lowest amount in 15 months, since April 2017.

The number of mortgages being approved to home-buyers fell in July to 64,768, from just over 65,000 in June.

Some 44,775 re-mortgage loans were also approved in July.

The report said: "Approvals can be volatile and for re-mortgaging are at their lowest since May 2017, however they remain above levels seen in recent years."

Net lending to businesses increased to £2.7 billion in July, mainly driven by the public administration and defence industry, according to the Bank.

Jeremy Leaf, a north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors (Rics), said of the mortgage data: "These figures are a little disappointing in that they reflect a period when we would have expected a pick-up in the market over the spring buying season.

"Buyers and sellers are still engaged in a stand-off, whereas lack of energised demand has meant there is often very little urgency to complete deals, even when terms have been agreed.

"There are regional variations, however. In London, owners who have accumulated property wealth from previous booms seem more reluctant to recognise softening prices, whereas outside the capital, where loans to value are generally higher, we have noticed more enthusiasm to move.

"Overall, viewings are starting to rise as buyers return from holiday so we do expect to see some increase in activity over the next few months."

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