Consumer borrowing and savings levels fall

Consumer borrowing and saving levels fell in May, official data showed.

Bank of England data revealed that individuals borrowed an additional £800million in consumer credit from loans and credit cards in May, compared with £1.4billion of borrowing in April 2022 and below the pre-pandemic 12-month average to February 2020 of £1 billion.

An additional £5.4bn in savings was deposited with banks and building societies in May, up from £5.7bn a month earlier.

Laura Suter, head of personal finance at AJ Bell, said the numbers could incorrectly suggest the cost of living crisis is over.

Read more: Consumer credit: watch out for the gap

“As a nation, our borrowing and savings in May are around pre-pandemic levels,” she said.

“The reality is that these average numbers hide a divided nation, with some households able to withstand rising prices for food, gasoline, energy and almost everything else, either by budgeting and cutting costs. costs, or because they have sufficient income to cover it.

“These households are also still able to put money aside each month, and with tough investment markets, some are likely to park it in cash rather than dive into the markets.

“On the other hand, we have another part of the population who have exhausted their savings, cut all possible cuts and are now turning to debt to pay their bills every month. Budgeting can only get you this far if your income isn’t growing and all your bills are.

Read more: Mortgage approvals and consumer borrowing down

In the mortgage market, the Bank of England said £7.4bn was borrowed against properties in May, a 76% increase since April.

Mortgage approvals for home purchases, an indicator of future borrowing, hit 66,200 in May from 66,100 in April.

This figure is slightly lower than the pre-pandemic 12-month average to February 2020 of 66,700.

“This suggests that the housing market mania seen over the past two years has subsided and returned to pre-pandemic or lower levels,” said Rosie Hooper, certified financial planner at Quilter.

“Given the incredibly fast-moving housing market, this is due to a slowdown and house prices could also stagnate as a result.”

Read more: P2P borrowing rates will not move yet despite the BoE’s new rate hike

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