Within this, the data shows that net borrowing through credit cards rose from £0.2bn in April to £0.6bn in May, while net borrowing through other forms of consumer credit (such as car finance and personal loans) increased from £0.6bn to £0.9bn over the same period.
The rate of interest charged on overdrafts fell by 18 basis points to 22.58% in May on average, while the average rate of interest for credit cards rose by 19 basis points, from 21.46% in April to 21.65% in May.
Tom Cuppello, director at independent consultancy Broadstone, said: “April’s significant dip in consumer credit borrowing appears to have been a blip, with volumes bouncing back to more typical levels in May.
“Credit card borrowing was particularly high and reflecting consumer spend through the two May bank holidays as well as ahead of the summer holidays. Confidence in the economic landscape and personal finance remains fragile, but there is growing optimism that the worst could be behind us.”
Mortgage approvals
The Bank of England report also shows that people borrowed, on net, £1.2bn of mortgage debt in May, down from £2.2bn in April.
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UK net mortgage approvals are seen as an indicator of future borrowing. The figure dipped in May as lingering affordability concerns caused borrowers to approach the market with caution.
Interest rates have remained on pause at a 16-year high of 5.25% since August last year, something also impacting net mortgage lending, which fell in May amid wavering consumer confidence.
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said: “Inflation may be easing, but persistently high borrowing costs are still making it hard for buyers to secure the homes they want. This was evident in the effective rate on newly drawn mortgages, which rose five basis points to 4.79% in May.
“The rate on the outstanding stock of mortgages also rose with a four-basis-point increase to 3.61%, as more people rolled off cheap fixed rate deals secured before the BoE’s rapid rate-hiking cycle began.”
Savings on the up
Household deposits with banks and building societies rose by £5.3bn in May. This was driven by households depositing an additional £4.2bn into ISAs, following a record net inflow of £12.3bn in April.
The effective interest rate paid on individuals’ new time deposits with banks and building societies was 4.43% in May, up from 4.4% in April.
Haine said: “Savers deposited an additional £5.3bn into their savings accounts in May, with ISA saving remaining strong following April’s end-of-tax-year surge as people increasingly consider how tax-efficient their nest eggs are.
“Saving rates on regular bank and building society accounts may have retreated from the highs seen last summer, but despite a base rate cut on the horizon, the effective interest rate – the actual interest paid on new fixed accounts – rose by three basis points to 4.43% in May.”
