Consumer credit growth at lowest level in five years

Traditionally, people deposit their money in bank accounts and pay using checking accounts.

Lending to consumers rose at its weakest pace in five years in May because of concerns about the economic outlook, while mortgage approvals also dipped, according to the Bank of England.

The annual rate of consumer credit growth, which includes credit cards, overdrafts and car finance schemes, slowed to 5.6 per cent, down from 5.9 per cent in April and well below the 10.9 per cent peak in November 2016. People borrowed an additional £800 million in the month, down from £1 billion in April and significantly below the £1.2 billion peak in August.

Economists noted that wage growth, which has been outpacing inflation, was beginning to sustain improvements in living standards. This may be reducing the demand for credit.

Anxieties about the economy also have been felt in the housing market. According to the Bank, mortgage approvals fell slightly to 65,400 in May, from 66,045 in April. Mortgage lending rose by £3.1 billion in May, down from £4.1 billion in April. Despite the dip, the annual growth rate for mortgage lending was stable at about 3.2 per cent.

Howard Archer, chief economic adviser to the EY Item Club, said: “While consumers have clearly been less affected by Brexit uncertainties than businesses, the overall impression remains that they have become relatively careful in their borrowing.”