January saw a further rise in lending by banks to consumers and businesses as the credit boom continues, helped by record low interest rates.
According to the latest figures released by the British Bankers Association (BBA) consumer credit more than doubled from December’s figure, reaching ?538 million in total.
Personal loans and overdrafts accounted for much of the total, reaching an eight-month high of ?422 million as people financed Christmas spending.
The Bank of England had already voiced concerns over the growth of consumer credit, and are likely to be further troubled by the latest figures.
Chief European and UK economist at IHS Global Insight, Howard Archer, commented: ‘There have been mounting signs that consumers are becoming more cautious in their spending as their purchasing power is increasingly diluted by rising inflation, but the January BBA data suggests that they are still prepared to borrow.’
He continued: ‘January?s rise in unsecured credit will likely be of some concern to the Bank of England. In a speech in mid-January, Governor Mark Carney indicated that the Bank of England will closely monitor consumer dynamics over the coming months.’
Mortgage approvals also saw a surge to 44,657 as people took advantage of the historically low interest rates and special offers released by many lenders.
Mortgage borrowing hit a gross figure of ?13.8 billion, boosted by re-mortgaging approvals rising 15.7 per cent year on year from January 2016.
Business borrowing from banks also rose by ?3.4 billion in January. The highest monthly rise for two years. However, this is not seen as a problem by the Bank of England who actively encourage businesses to borrow with its ‘term funding scheme’ helping banks lend to private sector businesses to encourage economy growth.
The British Banking Association did comment however that ‘borrowing was largely short term and will probably unwind next month’ feeling that businesses were likely to become cautious about borrowing during 2017.