Key facts
- Unsecured lending to British households rose at the fastest annual pace since 1993 in August.
Unsecured lending to British households increased at the fastest annual pace since 1993 in August, according to Bank of England data. The rise suggests solid household demand despite persistent inflation, with some economists noting it may also reflect affordability challenges. Mortgage approvals, however, fell to their lowest level since December 2023.
The strong growth in unsecured lending suggests resilience in household demand despite inflationary pressures, but also highlights potential affordability issues. The contrasting decline in mortgage approvals indicates a cooling housing market, while anticipated tax rises and interest rate hikes by the Bank of England could impact future consumer spending and borrowing.
Unsecured lending to British households surged in August at the fastest annual rate recorded since 1993, according to data released by the Bank of England on Tuesday. This increase of £2.464 billion surpassed economists' expectations of a £1.9 billion rise, indicating robust consumer demand.
This surge in borrowing coincides with a two-year high in consumer confidence, as measured by market researcher GfK. Official figures also revealed an unexpected increase in shopper spending last month. However, analysts suggest that persistently high inflation may be compelling consumers to rely on credit to manage their finances.
In contrast to the rise in unsecured lending, mortgage approvals for house purchases declined to 54,918 in August, marking the lowest figure since December 2023 and falling short of economists' median forecast of 56,100. This follows 55,928 approvals in July.
Finance minister John Healey is scheduled to present his first annual budget on October 28, with many economists anticipating tax increases to meet government deficit reduction targets. Meanwhile, investors anticipate the Bank of England will raise interest rates in November and again in February.
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