Consumer credit growth climbs to 8.9%

Latest data from the Bank of England has shown that consumer credit growth climbing to 8.9%, exceeding the 8.6% recorded in February. Within this total, the annual growth rate for credit card borrowing increased to 12.3% from 12.1% a month earlier. Consumer deposits with banks and building societies increased by £5.5 billion in March. The Bank’s report also shows that non-financial businesses borrowed £7 billion in loans from banks and building societies, including overdrafts, in March, following £4.2 billion of net borrowing in February.

Net borrowing of consumer credit by individuals slightly decreased to £1.9 billion in March from £2.0 billion in February, slightly above the previous 6-month average of £1.8 billion. Within this, net borrowing through credit cards remained unchanged when compared to February, at £0.7 billion in March. Net borrowing through other forms of consumer credit (such as car dealership finance and personal loans) was £1.2 billion in March, down from £1.3 billion in February.

The data shows that mortgage approvals for home buyers hit a four-month high in March, with 63,531 loans approved for house purchases. This is the highest total since November and exceeds the six-month average of 63,200 approvals. Approvals for remortgaging climbed to 51,300 in March from 41,200 in February, with this data only covering deals involving a different lender.

Net borrowing of mortgage debt by individuals increased to £6.2 billion in March, from £5.2 billion in February, above the previous 6-month average of £4.9 billion. Net mortgage approvals for house purchases increased to 63,500 in March from 62,700 in February, above an average of around 63,200 over the previous 6 months. Approvals for remortgaging increased to 51,300 in March, from 41,200 in February.

Net mortgage approvals for house purchases also increased to 63,500 in March from 62,700 in February, above an average of around 63,200 over the previous 6 months. Approvals for remortgaging increased to 51,300 in March, from 41,200 in February.

Damien Burke, Head of Regulatory Practice at Broadstone, said “The Bank of England’s figures for March highlight the UK’s improving economic situation even as the conflict in Iran began with mortgage borrowing increasing and consumer credit lending remaining at healthy levels.

“Volatility, however, is now back on the agenda for lenders as the duration of the conflict and the economic consequences remain unknown which is likely to impact consumer confidence. The Bank of England forecast yesterday that, in a worst-case scenario, interest rates could rise to 5.5% with inflation peaking at 6.2% which would almost certainly dampen borrower appetite.

“In this environment, lenders will need to closely monitor customer affordability and be proactive in identifying and supporting those who may come under pressure, to spot risk as early as possible and ensure early engagement before financial difficulties escalate.”

Ravi Sidhu, Subject Matter Expert – Credit Risk, Dun & Bradstreet said “March’s rise in business lending suggests that despite current geopolitical uncertainty, SMEs are regaining their footing and finding ways to maintain momentum. The increase indicates a level of resilience in which firms are actively looking to invest, refinance, or shore up working capital, rather than retreating in the face of unpredictable interest rates and rising costs.

Banks are more likely to continue backing businesses that demonstrate a clear understanding of their cash flow and wider cost pressures. As the focus shifts from expansion to strategic liquidity, timely data and visibility across supply chains and cash flow will help businesses stay flexible, particularly amid ongoing volatility in costs such as fuel.”