Borrowing growth 'strong' as Bank of England report shows 10.3% increase
Consumers' non-mortgage borrowing showed "strong" growth in May, with a 10.3% annual increase, according to a Bank of England report.
The Bank's Money and Credit report showed credit card borrowing increased by £419 million in May, which was lower than a £558 million increase in April.
Other types of non-mortgage borrowing, including personal loans and overdrafts, showed a £1.3 billion increase in May, the biggest jump since November last year.
The latest annual increase in consumer credit equals a 10.3% 12-month uplift also recorded by the report in April.
The report said: " Annual growth in consumer credit remained strong at 10.3% in May, although below its peak in November 2016."
Concerns have been raised in recent months that, as living costs rise, some households could be at risk of over-stretching their borrowing.
On Tuesday, the Bank raised fears over levels of consumer borrowing, as it announced plans that will see banks build up their capital buffers.
The Bank warned earlier this week: "The credit quality of the stock of lending can deteriorate quickly.
"Lenders expect to continue to grow their portfolios this year, at the same time as real household income growth is expected to remain particularly weak."
The Money and Credit report also said mortgage approvals for house purchase were "broadly stable" in May, with 65,202 loans getting the go-ahead. Approvals for re-mortgaging edged up to a three-month high, with 42,955 approvals recorded in May.
Loans to large non-financial businesses increased by £3.5 billion in May, while loans to small and medium-sized enterprises were largely unchanged, the Bank said.
Howard Archer, chief economic adviser at EY ITEM Club, said: "This was the 13th successive month of double-digit year-on-year consumer credit growth, and occurred despite weakened retail sales during the month.
"It may well be that the heightened squeeze on consumer purchasing power is increasing the need for some consumers to borrow.
"The Bank of England will be far from happy with the May consumer credit data, and it could bolster the case for a near-term interest rate hike to try to curb consumers' readiness to borrow."
Samuel Tombs, c hief UK economist at Pantheon Macroeconomics, said: " With CPI (Consumer Prices Index) inflation running just below 3%, it's clear households have little scope to increase spending."
Joanna Elson, chief executive of the Money Advice Trust, the charity that runs National Debtline, said: "Consumer credit is continuing its relentless growth, and these figures show that the Bank of England was right to act this week to curb the huge growth in household borrowing we are seeing.
"While most households can cope with this extra borrowing at the moment, the risk is that many people could find themselves exposed to financial difficulty should their circumstances change.
"In these uncertain economic times, households should be cautious about taking on extra borrowing - and consider how they would be able to cope with their repayments in the event of a shock to their income.
"We have already seen an 8% rise in the number of people helped by National Debtline by phone so far this year, and we expect demand for debt advice to continue to increase."