- June mortgage approvals 58.2k vs 57.2k expected
- Prior 56.2k; revised to 56.6k
- June net consumer credit £1.8 billion
- Prior £1.7 billion
The net borrowing of mortgage debt by individuals in the UK increased to £7.7 billion in June, up from £3.3 billion in May. That comes as net mortgage approvals also show a jump to 58,200 on the month, though continuing to keep below the running 6-month average of around 61,400 approvals. The breakdown shows that approvals for remortgaging increased to 34,200 in June, up from 33,800 in May.
Meanwhile, net borrowing of consumer credit increased slightly to £1.8 billion – holding in line with the running 6-month average. Net borrowing through credit cards was £0.9 billion while net borrowing through other forms of consumer credit was also £0.9 billion in June.
Looking to the annual rate of all consumer credit growth though, that is seen at 9.1% in June and a slight step up from 9.0% in May. While that may seem like a good thing, the worrying part though is that the annual growth rate for credit card borrowing has increased further to 12.5%. It is now keeping well above double-digits and even accelerating amid the economic uncertainty from the US-Iran conflict.
So, what does that mean?
While stronger consumer credit growth often points to the economy firing on all cylinders, the case in point now might be a bit different. Instead, it is likely pointing to households having to borrow out of necessity. That being when cost of living is seen growing more expensive, households have to turn to credit cards and overdrafts just to cover essential daily expenses.
In other words, it is a signal of financial strain in the sense that the lower-to-middle class are depleting cash savings and relying on high-interest debt.
And the narrative here fits with what we’re seeing with UK credit default data from earlier this month.
The recent BOE survey showed that the proportion of lenders saying default rates rose over the previous three months outnumbered those reporting declines by 34%.
That marked a sharp increase from around 18% in Q1 and is the highest reading since 2009. Trouble, trouble.
This article was written by Justin Low at investinglive.com.
