Households collectively borrowed more using consumer credit than they paid off in May – marking the first time this has happened since last August.
Net consumer credit borrowing – which includes personal loans, overdrafts and credit cards, stood at £280 million in May, figures from the Bank of England show.
It reverses a trend in recent months of people paying off more than they borrowed using consumer credit.
The May increase in net consumer credit reflected borrowing such as car dealership finance and personal loans, the Bank said. Within the total figure, credit card lending remained weak compared to pre-February 2020 levels, with a net repayment of £101 million.
The typical rate paid on new personal loans remains low at 5.61%, compared to 7.03% in January, the Bank’s Money and Credit report said.
The latest consumer credit figure marked a reversal from April, when a net repayment of £228 million was recorded, reflecting households paying off more than they borrowed.
People have generally been making significant net repayments of consumer credit since March 2020 – the month when the UK coronavirus lockdowns started.
Martin Beck, senior economic adviser to the EY ITEM Club said of the latest figures: “Consumers took advantage of the further relaxation of restrictions and greater opportunities for social consumption.”
He added: “With many consumers having strengthened their balance sheets markedly during the pandemic, the EY ITEM Club expects to see rebounds in both spending and demand for credit.”
Net mortgage borrowing meanwhile bounced back to £6.6 billion in May.
This followed variability in the previous couple of months as households anticipated a stamp duty holiday ending, the Bank said.
The full stamp duty holiday was extended to the end of June and will be tapered into the autumn before reverting to normal levels.
Net mortgage borrowing previously stood at £3.0 billion in April, following a record £11.4 billion of net borrowing in March.
In a sign of future mortgage lending, the number of mortgage approvals made to home buyers increased slightly in May to 87,500, from 86,900 in April. Approvals have fallen from a recent peak of 103,200 in November, but remain above levels seen before February 2020.
New mortgage rates paid crept up slightly, but the typical rate on the outstanding stock of mortgages remained unchanged at a low for the Bank’s records of 2.07%.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Once again the timing of the ending of the stamp duty holiday had an impact on mortgage lending with a bounce back in May to reflect the extension in the concession. For many buyers, the saving has made a significant difference.”
Households deposited an additional £7.0 billion with banks and building societies in May. The figure has fallen recently and compares with peak of £27.6 billion in May 2020. The flow of cash going into accounts is nevertheless relatively strong, the Bank said.
In the year to February 2020, the average inflow was £4.7 billion.