UK consumers started borrowing again in May, amid an increase in auto finance deals and personal loans ended an eight month streak of people pay their credit bills.
For the first time since August 2020, consumers borrowed more consumer credit than they paid in May, according to new data from the Bank of England.
Net borrowing rose by Â£ 280million in the month, compared with a net repayment of Â£ 228million in April (when the public collectively paid off their credit bills faster than they added).
Many stores did not reopen until after the lockdown in April, while pubs and restaurants in England resumed serving indoors in May. This easing of the foreclosure gave people the option to spend again, perhaps on credit.
As the economy reopens, more and more people are going to their places of work, which could lead to increased demand for cars.
Additionally, with the increase in corporate payrolls in May and the decrease in the number of people on leave, consumers may feel more confident about borrowing (and possibly further spending when they return to work). ).
Credit card loans remained low in May compared to pre-pandemic levels, with a net repayment of Â£ 101million.
Instead, there was a Â£ 381million increase in ‘other’ forms of consumer credit, such as car dealership financing and personal loans.
Households also placed less money in their bank accounts in May, another sign that people may be taking the opportunity to spend again.
Household net flow to deposit accounts fell to Â£ 7.0bn in May, from an average of Â£ 16.5bn in the six months to April 2021, and below the record high from Â£ 27.6 billion in May 2020, when the first foreclosure unintentionally resulted in the economy.
The report also shows that there were 87,500 mortgages approved in May, up from 86,900 in April. That’s lower than the recent peak of 103,200 in November 2020, but still higher than before the pandemic.
Net mortgage borrowing rebounded to Â£ 6.6bn in May from Â£ 3.0bn in April, suggesting that the extension of the stamp duty deadline from the end of March created a rush. demand (hit a record Â£ 11.4 billion in March, to close deals ahead of the first deadline)
So, taken with the house price hike in June, this suggests that consumers are helping the economy recover from its pandemic slump.