UNSECURED consumer lending has slowed to its lowest level since 2014, as Brits scale back their spending amid Brexit uncertainty.
The latest Bank of England Money and Credit statistics also found that the total number of mortgage approvals fell from 126,794 to 124,829 in December 2018, indicating an overall lag in the lending market.
Meanwhile, mortgage approvals for house purchase were around 63,800 in December – just slightly less than the 2018 average of 65,200.
According to the Money and Credit report, annual growth in unsecured consumer lending dropped from 7.2 per cent in November to 6.6 per cent in December.
This is the smallest increase in consumer credit since December 2014.
Analysts have blamed Brexit for the consumer credit slowdown, and warned that consumer borrowers are likely to remain cautious for the foreseeable future.
“The ongoing slowdown in net unsecured consumer credit growth to a four-year low in December reinforces belief that heightened uncertainties focused on Brexit are likely to weigh down on the economy in the near term at least,” said Howard Archer of the EY Item Club.
“Significantly, the latest Bank of England credit conditions survey showed lenders expect the demand for unsecured consumer credit to fall in the first quarter of 2019 at the fastest rate since records began in 2007.
“Heightened concerns over Brexit and the economic outlook, the very low household savings ratio and the prospect of gradual interest rate rises over the coming months are likely to limit consumer willingness to borrow.”
Josie Dent, an economist at the CEBR, pointed out that consumer confidence has been declining recently, making many people more reluctant to borrow.
“To make ends meet many households are instead cutting back expenditure, for which the struggling high street provides evidence, as many consumers have curbed spending on retail goods,” she said.
She warned that households are dealing with “unsustainable levels of debt” and pointed towards figures released earlier this week which found that personal insolvencies in the UK had reached a seven-year high.
The mortgage lending market has been faring better than the consumer lending market, with £4.1bn secured against property in December, slightly above the average of the previous six-months. This too is due to Brexit uncertainty, according to mortgage experts.
“It’s no surprise that mortgage lending has remained steady as cautious borrowers wait for decisive news on Brexit,” said Steve Seal, director of sales and marketing at Bluestone Mortgages.
“Advisers can help to boost activity in the meantime, though, by explaining which mortgage products are most suitable for their client’s individual circumstances right now – and fixing can provide certainty during this uncertain time.”