UK consumer borrowing slumps in July

CONSUMER credit growth slowed in July, while business borrowing remained subdued, new Bank of England data shows.

The trends were revealed in the latest monthly Money and Credit statistics issued by the Bank, covering the month of July.

The data showed the annual growth rate of consumer credit slowed to 8.5 per cent during the month.

This gradual slowdown continues a trend seen since late 2016, but annual growth remains elevated, especially compared to 2009-2012, the Bank said.

Read more: Mortgage and business lending see summer slowdown

Net new consumer borrowing, excluding mortgages, fell to £800m in July, down from £1.5bn in June.

This is notably below the £1.5bn average of the past three years. The BoE said this reflected weaker credit card lending and other types of loan including overdrafts and car finance.

Households borrowed an extra £3.2bn secured against their homes in July, the lowest level of monthly secured lending since April 2017, the Bank said.

Net lending overall has been relatively stable over the past year, it added.

The number of mortgages approved for house purchases fell a little in July to 65,000, close to their six-month average, while remortgage approvals fell 5.5% to 45,000, their lowest since May 2017.

Meanwhile, net bank lending to businesses rose to £2.7bn during the month.

This was made up of £3.1bn of net lending to large businesses, and a £400m reduction of net lending to SMEs. The strength in lending to large businesses this month was driven by an increase in lending to the public administration and defence industry.

Read more: How P2P plugged the funding gap for small businesses

“It’s no surprise to see that mortgage lending has experienced a dip this month, as the effect of the Bank of England’s August rate rise won’t kick in until September – especially when it comes to remortgages,” Vikki Jefferies, proposition director at PRIMIS mortgage network and Personal Touch Financial Services, said.

“However, even though some borrowers may be tempted to take action before rates rise again, the threat of a ‘no-deal’ Brexit has many customers nervous. It’s therefore essential that the lines of communication between brokers and their customers are kept open.”