LONDON — Brits borrowed over £300 million more than forecast last month in the form of consumer credit, according to new statistics released by the Bank of England on Thursday morning.
Data shows that credit worth £1.732 billion was taken during the month of May, far higher than the £1.4 billion that forecasters expected would be borrowed, and also well above the £1.438 billion borrowed in April.
Consumer credit encompasses various forms of credit-based borrowing, including credit cards and car financing. It is used as a broad indicator for the health of an economy. Generally speaking, when times are good, consumers can afford to buy big-ticket items on credit and easily repay them, helping to stimulate growth.
However, credit growing too quickly can indicate that an economy is overheating and could be close to a downturn.
The data comes just two days after the bank used its twice-annual Financial Stability Report, in which the central bank expressed concerns about the rapid growth of consumer credit in the UK.
“Consumer credit has increased rapidly. Lending conditions in the mortgage market are becoming easier. Lenders may be placing undue weight on the recent performance of loans in benign conditions,” the report noted.
“Consumer credit grew by 10.3% in the twelve months to April 2017 (Chart B) — markedly faster than nominal household income growth. Credit card debt, personal loans and motor finance all grew rapidly,” the report added.
Here is the chart mentioned above:
The Bank of England also released data on Thursday showing that more people than expected had taken out mortgages last month. 65,202 people were approved for a mortgage in May, a little above the 64,000 forecast.
Mortgages are another area of concern for the bank, which has recommended a tightening of lending rules to help fend off any bubble that could possibly inflate in the property market.