UK consumer borrowing rose sharply in February and savings deposits fell as the cost of living increased, Bank of England figures showed.
Households borrowed a net £1.9bn in consumer credit, up from £0.6bn a month earlier and almost double the pre-pandemic average of £1bn, the BoE said. Analysts on average had expected £0.9bn of extra borrowing.
The increase was split between £1.5bn extra borrowing on credit cards and £0.4bn in other consumer credit such as car finance and personal loans. The annual growth rate for all consumer credit increased to 4.4% from 3.2% in January – the highest rate since February 2020.
Consumer borrowing fell during several months of the pandemic as households tightened their belts with fewer options for spending during lockdowns.
February’s revival of borrowing happened before the war on Ukraine and the intensifying of the cost of living crisis. Consumer confidence plunged in March as prices soared, a recent survey showed.
Households deposited £4bn with banks and building societies in February and £1.1bn into national savings. The total of £5.1bn was less than £7.8bn in January and the £5.5bn average in the year before the start of the pandemic.
Samuel Tombs, a UK specialist at Pantheon Macroeconomics, said: “The recent sharp fall in the consumers’ confidence suggests that households will run down these savings only cautiously over the next year.
“Weak sentiment also indicates that the big rise in consumer borrowing in February likely reflects households attempting to maintain their consumption at a time when real disposable income is falling sharply, rather than them going on a spending spree.”
Net mortgage borrowing fell to £4.7bn in February from £5.9bn a month earlier, suggesting a cooling of the frenzied property market though with borrowing still above the pre-pandemic average of £4.3bn.
Mortgage approvals for house purchases, an indicator of future borrowing dipped to 71,000 from 73,800 the month before but stayed 4,300 higher than the pre-crisis average. Analysts on average had expected approvals to rise slightly to 74,700.