Growth in borrowing drops while savings stagnate, says report

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Growth in borrowing on loans, credit cards, and overdrafts slowed in May, indicating that consumers are beginning to cut back on spending.

The British Bankers Association (BBA), which published the report, said annual growth in consumer spending eased to 5.1 per cent, down from 6.4 per cent recorded in April.

It said that this is the weakest growth rate since October 2015.

It also found that annual growth in savings deposits dropped to 2.6 per cent – the lowest rate for more than five years.

Eric Leenders, the BBA’s retail banking managing director, said: “This month’s figures show that in the run-up to the general election, credit growth in personal loans, cards and overdrafts has slowed, which was reflected in lower spending, with increased household costs affecting growth in deposits and saving.”

A squeeze on savings also contributed to declining activity in the housing market, with mortgage deals dropping to 40,347, compared to 40,686 in April.

Remortgage levels also dropped, with approvals down 10 per cent to 24,248.

Estate agent Jeremy Leaf said: “Last May the housing market was still reeling from the imposition of the 3 per cent stamp duty surcharge on second homes so we would have expected approval numbers to have been considerably above where they were this time last year.

“Looking forward, there is no indication that we will see a bigger correction in the property market, just a continuation of what we have seen over the past few months – more cautious trading and more realism among buyers and sellers.”