Mortgage lending reached an all-time high last month, while the consumer credit market showed signs of recovering, as borrowers racked up £300m of debt in June.
The latest Bank of England Money and Credit statistics found that consumer borrowing increased for a second consecutive month. Consumers borrowed more than they paid off in June, although overall they borrowed slightly less than they did in May.
Analysts said that the June statistics were a sign of growing consumer confidence, and the post-pandemic economic recovery.
“This boost in borrowing, driven by an increase in demand for mortgages, motor finance, and personal loans, is a sign of strengthening consumer confidence, and bodes well for the UK’s economic recovery,” said Paul Heywood, chief data & analytics officer at Equifax UK.
“Furthermore, it appears that some of the savings habits developed by the nation during the pandemic are sticking around, improving individual financial resilience while barely dampening the summer spending surge we would usually expect.”
Heywood added that Equifax hasn’t seen a huge spike in arrears and defaults, but he pointed out that “we’re not out of the woods yet”.
“Our own data showed that July evidenced a level of income shock amongst lower earners, despite the reopening of hospitality and greater confidence in the job market,” he said.
“14 per cent of low earners and 17 per cent of high earners evidenced a level of income shock in July, and while it is unlikely to be enough to derail the recovery, it is something that will be playing in the mind of lenders as demand for credit begins to recover back toward pre-pandemic levels.”
Meanwhile, mortgage lenders suggested that the record level of borrowing in June was due to a combination of pent-up demand, the race for more space and the stamp duty holiday.
“June’s financing levels were substantially higher than in March, the original stamp duty deadline, indicating that the scheme’s extension gave many buyers the breathing space they needed to complete their house move in time to achieve the savings,” said Paul Stockwell, chief commercial officer at Gatehouse Bank.
“Stamp duty savings have started to taper off and approvals have dipped slightly. We could see yet another rush of sales ahead of the end of the stamp duty savings coming to an end in September, but home finance is unlikely to get close to what we saw in June.”