UK consumer credit fell sharply in May

According to the report from Bank of England, UK households and businesses continued to increase their deposits in banks and building societies in May. Sterling money held by households, non-financial businesses, and financial businesses rose by £52.0 billion, following large increases in March and April.

Corporates borrowed an extra £7.4 billion from banks in May, as well as raising £3.5 billion from financial markets. The borrowing from banks was more than accounted for by a sharp increase in borrowing by SMEs of £18.2 billion, with large businesses repaying £12.9 billion of loans.

The cost of PNFC’s new borrowing fell in May, with effective rates falling by 1.2 percentage points to 1.05%. Within this, rates for SMEs fell by more, by 1.5 percentage points to 0.98%.

Households repaid more loans from banks than they took out. A £4.6 billion net repayment of consumer credit more than offset a small increase in mortgage borrowing. Approvals for mortgages for house purchase fell further in May to 9,300.

The interest rate paid by households on new secured borrowing was little changed in May, while the cost of new consumer credit fell to 5.10%, nearly 2 percentage points lower than at the start of 2020.