Consumer credit growth accelerated in October for the first time in more than a year, raising hopes that household spending might continue to support the UK economy in the final part of the year.
Unsecured lending to individuals rose 6.1 per cent in October, up from 5.9 per cent in September and the first acceleration since June 2018, according to data released by the Bank of England on Friday.
Consumers borrowed an extra £1.3bn to buy goods and services, above the £1.1bn average since July 2018, with net borrowing rising for both credit cards and other loans.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, a consultancy, said: “Monetary indicators continue to suggest that GDP growth will regain some momentum over the coming quarters.”
Bank of England monetary data are closely watched as a measure of the health of the consumer sector, which has been the most resilient part of the economy this year. In the third quarter, household consumption was a key driver of economic growth, expanding 0.4 per cent compared with the previous quarter
Despite the uptick, consumer lending growth is still well below the 10 per cent average expansion in 2016, when the UK voted to leave the EU.
However, other economists warned that the October pick-up in credit might not signal a trend. It contrasts with falling retail sales, plunging new car sales and record low consumer confidence.
Howard Archer, chief economic adviser at the EY item club consultancy, said: “It remains to be seen if October’s pick-up in unsecured consumer credit growth is a blip or the start of an upward trend.”
A weakening labour market is adding to fears that the acceleration in lending might not last.
The Bank of England also reported on housing lending data, which portrayed a gloomier picture.
Mortgage approvals for home purchases fell to a seven-month low of 64,600, down from 65,800 in September and below the average of the previous six months of 66,000.
The housing market has sharply cooled over the past three years. More than 72,000 mortgages were approved in each of January and February 2016, when house prices were growing at an annual rate of around 8 per cent.
In September, house price growth slowed to 1.3 per cent, according to separate data from the Office for National Statistics.
“Housing market activity is currently faltering amid an unappetising cocktail of Brexit, [and] economic and domestic political uncertainties” said Mr Archer.
