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UK consumer borrowing surge hints at cost-of-living crunch -Breaking


© Reuters. FILEPHOTO: After the Bank of England became the world’s first major central bank to raise interest rates after the COVID-19 pandemic in December 2021, a man with a mask on walks past it. REUTE


Andy Bruce

LONDON, (Reuters) – British households increased their borrowing in March and February by more than three times the normal amount. While this would be a sign for solid demand it might also indicate how some British families are getting deeper into debt.

In March, the Bank of England reported that lending to consumers increased by 1.3 million pounds ($1.64 billion) in net terms. After a fast 1.6 billion-pound rise in February, economists at Reuters expected this to happen.

This was the largest borrowing in a period of two months since early 2019

More than half the March increase was due to credit card lending. This occurred before there were sharp increases in energy prices and an increase of taxes.

While considering how far to increase interest rates, the BoE monitors inflation and looks for any signs that it is having an impact on the economy.

Expect the central bank to raise its Bank Rate by 1.0%, from 0.75% Thursday.

Capital Economics’ economist Paul Dales stated that consumer spending hasn’t fallen because of a dip in confidence in recent months and an inflation-adjusted drop in incomes.

Money Advice Trust is a charity that says recent rises in credit card borrowing could signal a weak economy and not a sign to increase household spending.

On Wednesday, the British Retail Consortium reported that British shop prices jumped at an alarming rate last month. This is not the first time this has happened in a decade.

According to economists, the BoE did not show that households with greater wealth who had saved during the pandemic were actually spending their money. This is a sign of a possible recession.

“Households continue to refuse to touch the savings that they have accumulated since the pandemic,” stated Samuel Tombs from Pantheon Macroeconomics.

According to the BoE, 7.0 Billion Pounds of Net Mortgage Lending was reported, an increase from February’s 4.6 billion and 70.961 mortgage approvals. Although slightly lower than the prior month, it is still significantly higher than the pre-pandemic norm.

The momentum of the British housing market was maintained in the first month of 2022 despite the end of the temporary tax incentives on purchases of property in the second quarter of 2021.

($1 = 0.7988 pounds)