New positive on borrowing

THE pace of consumers’ non-mortgage borrowing has accelerated for the first time in over a year, Bank of England figures show.

Economists said it remains to be seen whether the pick-up was a “blip”.

Consumer credit, which includes borrowing using credit cards, personal loans and overdrafts, increased by 6.1 per cent annually in October, up from 5.9 per cent in September, the Bank’s Money and Credit report said.

A few years ago, annual growth in consumer credit was in double digits, sparking fears some households could be at risk of overstretching themselves.

The report said: “This is the first increase in the annual growth rate since June 2018, but it remains considerably lower than its post-crisis peak of 10.9 per cent in November 2016.”

The Bank’s figures also show the extra amount borrowed by consumers to buy goods and services increased to £1.3billion in October – which is above a recent average of £1.1billion. Howard Archer, chief economic adviser at EY ITEM Club, said: “It remains to be seen if October’s modest pick-up in unsecured consumer credit growth is a blip or the start of an upward trend.

“The overall slowdown in consumer credit growth has clearly been significantly affected by markedly weaker private car sales as this has reduced demand for car finance.

“October’s modest pick-up in unsecured consumer credit growth came despite evidence of slower consumer activity. Retail sales volumes dipped 0.2 per cent month-on-month in October, having been only flat in September.

“Additionally, private new car sales slumped 13.2 per cent year-on-year.”

Mr Archer said several surveys have indicated consumers have recently become more concerned “by the combination of a struggling domestic economy, heightened domestic political and Brexit uncertainties”.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said October’s increase in unsecured credit “suggests consumers are upbeat enough about the medium-term outlook for their personal finances to borrow more”.

‘This is the first increase in growth rate since June 2018’