Consumer borrowing and saving levels slide
Consumer borrowing and savings levels fell in May, official data suggests.
Data from the Bank of England has revealed that individuals borrowed an additional £800m in consumer credit from loans and credit cards in May, down from £1.4bn of borrowing in April 2022 and below the 12-month pre-pandemic average up to February 2020 of £1bn.
An additional £5.4bn of savings was deposited with banks and building societies in May compared with £5.7bn a month before.
Laura Suter, head of personal finance at AJ Bell, said the figures may mistakenly suggest that the cost of living crunch is over.
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“As a nation, both our borrowing and saving in May are sitting around pre-pandemic levels,” she said.
“The reality is that these average figures hide a split nation, with some households able to stomach the rising price of food, petrol, energy and almost everything else, either by budgeting and cutting costs or because they have sufficient earnings to cover it.
“Those households are also still able to stash money away each month, and with investment markets rocky it’s likely some are parking it in cash rather than diving into markets.
“On the flip side, we have another section of the population who have run through their savings, made all the cutbacks they can and are now turning to debt to settle their bills each month. Budgeting can only take you so far if your income isn’t rising and all of your bills are.”
Read more: Mortgage approvals and consumer borrowing in decline
In the mortgage market, the Bank of England said £7.4bn was borrowed against properties in May, a 76 per cent increase since April.
Mortgage approvals for house purchases, an indicator of future borrowing, ticked up to 66,200 in May, from 66,100 in April.
This is slightly below the 12-month pre-pandemic average up to February 2020 of 66,700.
“This suggests that the mania in the housing market seen over the last couple of years has subsided and is back around the pre-pandemic levels or lower,” Rosie Hooper, chartered financial planner at Quilter, said.
“Considering how incredibly fast moving the housing market has been, it is due a slowdown and house prices may also stall as a result.”
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