Lending to British households grew at its fastest pace in a decade in the run up to the EU referendum, new figures from the Bank of England have shown.
Consumer credit – a measure of loans and credit card debt, but not mortgages – grew by 9.9 per cent in the year to May, the fastest monthly increase since 2005. Borrowers now have a total of £184bn in outstanding unsecured debt, equivalent to around £7,000 per household.
Growth in lending on credit cards and other loans and advances such as overdrafts both increased in yet another sign that consumer spending has been propping up the UK economy.
Mortgage lending eased back slightly during the month, the Bank said, with the total amount issued for house purchases and remortgages standing at £18.9bn, down from £19.2bn in April. Experts said the housing market is likely to be distorted for the rest of the year given the property stampede in March to beat the stamp duty surcharge which came into effect in April.
Martin Beck, economist at the EY Item Club said he expects demand for borrowing to dampen given the economic uncertainty following the UK's vote to leave.
"With the wider economy likely to slow during the second half of the year, as the impact of last week's vote feeds through, we would expect the appetite of consumers to take on new credit may start to fade."
A poll of economists by Bloomberg released today showed nearly three quarters expect the UK economy to enter a recession at some point in the next 18 months. Markets are also fully pricing in a cut in interest rates, though experts warned this could even lead to higher interest rates for consumer borrowing due to wider economic uncertainty and the potential for debts to sour if unemployment rises or house prices fall significantly.