Consumer credit doubles to £1.5bn while mortgage lending halves from £2.2bn to £1.2bn

The amount of credit borrowed by households doubled in May compared with the previous month

Household credit borrowing saw a significant increase in May, doubling compared to the previous month, while mortgage approvals continued to decline, according to recent statistics.

Consumer credit borrowing rebounded to £1.5billion during the month, up from £800 million in April, according to data from the Bank of England. This includes borrowing through methods such as credit cards, personal loans and car finance, all of which saw an increase month on month.

Conversely, the number of mortgage approvals for house purchases dipped slightly to 60,000 in May from 60,800 in April. This figure provides an insight into what future borrowing and house sales may look like.

Furthermore, property buyers borrowed half the amount of money to secure their homes, dropping from a total of £2.2billion to £1.2billion month on month, the Bank reported. Alice Haine, a personal finance analyst at Bestinvest by Evelyn Partners, suggested that the dip in mortgage approvals reflects "lingering affordability concerns causing borrowers to approach the market with caution".

"Inflation may be easing, but persistently high borrowing costs are still making it hard for buyers to secure the homes they want," she said. "Interest rate cut hopes have been dashed throughout 2024, which is why all eyes are pinned on the next rate decision at the start of August when buyers and those looking to refinance are hoping for some respite."

Experts suggested this could be down to people delaying getting on the housing ladder until after Thursday's General Election, when they will know what the next government will be. The rise in consumer borrowing could also be partly driven by people splashing out more ahead of their summer holidays, experts said.

However, some cautioned against people taking on more debt while interest rates remain at a 16-year high. Karim Haji, global head of UK financial services at KPMG, said the uptick should be "monitored closely by lenders", adding: "Even if the Bank of England opts to cut the base rate at the next meeting, a likely 25 basis point cut would still leave the base rate above its long-run level."

This would reduce interest rates from their current level of 5.25% to 5%. "With this in mind, more borrowing at higher rates, at a time when the cost of living is still high, should be cause for additional vigilance amongst lenders," Mr Haji said. Meanwhile, after a record-high inflow of £12.3billion being locked into savings in April, the amount of money households deposited with banks and building societies went up by £5.3billion in May.

This was driven by an additional £4.2billion being put into ISA accounts. These figures suggest that people are taking the opportunity at the start of the new tax year, from April, to withdraw money from taxable savings accounts and put it into tax-free ISAs.