December sees drop in non-mortgage borrowing

Bank of England figures showed consumer credit recorded a net increase of £1 billion in December, marking the weakest growth since May 2015.

In November, the increase had been £1.9 billion - the biggest rise recorded since March 2005.

Within consumer credit in December, credit card lending increased by £228 million, and other types of borrowing including personal loans and overdrafts recorded an £812 million increase.

Both these figures were below the averages seen over the previous six months.

Consumer credit increased by 10.6% annually, edging down from a 10.8% rise recorded in November.

Howard Archer, chief UK and European economist at IHS Global Insight, said: “December’s slowdown in unsecured (non-mortgage) consumer credit growth will likely be of considerable relief to the Bank of England, which has clearly been becoming more fretful about consumer borrowing.

“However, it remains to be seen if December is the start of a slowing trend.”

Mr Archer said on one hand, the prospect of tougher economic conditions for households may make people more cautious about their borrowing, but on the other hand it could increase some people’s need to borrow.

“It looks inevitable that the fundamentals for consumers will progressively weaken over the coming months, with inflation rising markedly due to the weakened pound and companies likely increasingly looking to hold down pay to limit their total costs.”