Consumer borrowing grew by 6.4 per cent year-on-year in April, up from the 6.1 per cent annual increase seen in March, according to the latest data released by the British Banking Association (BBA).
At the same time the annual growth in personal deposits was only 2.7 per cent, which represents the lowest annual increase since 2011.
The report from the BBA confirmed that the consumer credit increase was fuelled by stronger credit card borrowing for retail sales. Personal loan and overdraft borrowing growth slowed.
Deposits into Individual Savings Accounts (ISAs) increased by only ?1.5 billion in April, significant drop from the ?2.1 billion increase seen in April 2016.
April 2016 saw the introduction of the personal savings allowance, meaning that people can keep savings in many other savings accounts rather than just ISAs without having to pay tax on the interest earned.
Mortgage approvals were down at 40,750 in April when compared to the monthly average of 41,959 seen over the previous six months.
Re-mortgaging approvals at 23,074 also showed a drop, over 10 per cent down year-on-year when compared to April 2016.
Company borrowing by non-financial companies was also down by ?583 million in April.
BBA managing director for retail banking, Eric Leenders, commented: ‘Annual growth in consumer borrowing from the main high street banks grew due to increased customer use of credit cards.
‘This was also reflected by an uplift in retail sales volumes, particularly among food retailers over the Easter period.
He continued: ‘House purchase approvals were largely in line with last year’s average, though re-mortgaging approvals have dipped slightly in recent months despite historically low interest rates.
‘Business lending in April was fairly flat, possibly reflecting the current uncertain climate.’
The rise in credit card spending, particularly in food retailers, is likely to further raise concerns about the reliance by households on credit. Many debt charities have already warned that consumers could be stretching themselves too far should an economic downturn come about.