UK mortgage borrowing rises but consumers cautious - BoE

UK mortgage borrowing rose to its highest since the end of the stamp duty holiday in January but consumer credit only crept up as households stayed cautious, Bank of England figures showed.

Mortgage borrowing increased to £5.9bn from £4bn a month earlier and mortgage approvals rose to 73,992 from 71,219, reflecting the busy UK housing market at the start of 2021. Both figures were above the pre-pandemic average.

Approvals for house purchases, an indicator of future borrowing, rose to 74,000 - the highest since July 2021 and well ahead of the pre-Covid average of 66,700.

The borrowing figure was the highest since September when the Chancellor's extended deadline for reduced stamp duty on property purchases ended. Many commentators had expected property transactions to slow down sharply after the holiday ended but the market has stayed buoyant as households have continued to rethink their property needs.

Away from the booming housing market, consumers were more cautious, borrowing an extra £0.6bn - below the £1bn average before the coronavirus pandemic. Only £0.1bn extra was borrowed on credit cards.

Households deposited an additional £7.7bn with banks and building societies - the highest figure for seven months, suggesting people returned to stashing money away after loosening their belts in December.

The BoE's survey captures consumer behaviour with the Omicron wave receding but with a cost of living crisis looming in the shape of tax rises, soaring energy costs, rising food bills and higher interest rates. Consumer confidence plunged to its lowest for more than a year in February, a separate survey showed last week.

Adam Hoyes at Capital Economics said: "A muted rise in consumer credit suggests that households were fairly cautious at the start of this year. With higher interest rates on the horizon and the cost of living crisis only set to worsen, we wouldn’t be surprised after a rebound in February to see credit growth remain weak in the months ahead.

"The one bright spot continues to be the housing market. While households are reining in their borrowing for other means, they still appear happy to borrow to buy housing."

Russia's invasion of Ukraine is likely to affect consumer spending and sentiment further with pressure on energy and food costs adding to general uncertainty created by the biggest land conflict in Europe since world war two.