Britons not yet confident enough in April to splurge, lending data reveal

Net mortgage borrowing and consumer credit growth both undershot economists’ forecasts in April, although mortgage approvals for home purchases continued at a “relatively strong” pace.
According to the Office for National Statistics, net mortgage borrowing slowed from £11.5bn in March – a record amount – to £3.3bn for April.

Consumer credit meanwhile continued to shrink, albeit at a slower pace, as Britons repaid a net £0.4bn of consumer credit (consensus: £0.5bn) which was less than the average £1.7bn repaid each month during the previous year.

Credit card repayments accounted for the drop in consumer credit.

The annual rate of consumer credit growth did however rise to -5.7% in April from -8.8% during the prior month.

However, approvals for home purchases picked up from 83,400 in March to 86,900 in April (consensus: 80,000).

In parallel, the ‘effective’ rate, which is the rate actually paid on newly drawn mortgages, dipped by seven basis points to 1.88%.

The effective rate was at 1.85% in January 2020 and reached a series low of 1.72% in August 2020.

All told, said Samuel Tombs, chief UK economist at Pantheon Macroeconomics, Wednesday’s figures showed that Britons weren’t confident enough yet to splurge.

Nonetheless, households did save the least in April since Covid-19 began, he added.

Tombs explained that households’ total liquid assets rose by £10.7bn in April – the least since February 2020 – but that even that was twice the £4.8bn average increase between 2018 and 2019.

The stock of “excess savings” meanwhile had jumped by £168bn or 8% of 2020 GDP and would overheat the economy if a “significant” portion were unleashed, Tombs said, but added that indicators of saving intentions remained high and that people would likely use those funds to top-up their pensions or pay off mortgage debt.

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