Credit card spending, personal loan take-up and house purchases all increased in the second quarter, according to UK Finance data, as consumer confidence returned and the stamp duty holiday made its mark.
The industry trade body’s household review revealed that credit card spending increased by 25 per cent from the first quarter to the second to reach its highest point since the start of the pandemic. The rise correlated with the lifting of lockdown restrictions.
Banks’ consumer lending was 26 per cent higher quarter-on-quarter, but remains lower than the level pre-pandemic.
UK Finance said the increase was down to the economic recovery and lenders looking to increase business and improve their market share in the sector may also be driving supply and could continue to be a factor going forward.
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Meanwhile, the stamp duty holiday boosted the housing market to reach new heights although the true level of underlying demand will not be clear until the tax break ends.
House purchase activity reached 244,860 in the second quarter, up from 46,520 in the same quarter last year and the highest level since 2007.
In the second quarter, new loans for first-time buyers totalled 112,340 and new buy-to-let loans reached 32,400.
UK Finance said looking ahead, the most immediate challenge to household finances is the winding down of furlough for those who do not immediately return to full employment following this scheme, so maintaining credit commitments may be a challenge.
“There was unprecedented demand in the housing market in the second quarter of 2021 as people sought to take advantage of the stamp duty holiday, with changes to working and living patterns encouraging more homeowners to use their existing equity, either to move further afield or to fund additional house purchases for themselves or family,” said Eric Leenders, managing director, personal finance at UK Finance.
“With the holiday now in its final tapering phase, demand was expected to decline, however applications towards the end of the quarter and into the third quarter remain higher than before the pandemic began, as we continue to witness the ‘race for space’.
“As Covid restrictions lifted the boost in consumer optimism was evident through modest increases in card spending and in unsecured borrowing.
“The continuing support provided by government and the banking sector for households’ impacted by the pandemic has prevented significant increases in arrears.
“As the UK emerges from lockdown and these schemes end most households will be able to resume normal payments. However, for those who are not immediately able to return to full employment, lenders stand ready to help with tailored support to best suit customers’ situations.”