- Consumer credit grew by £0.9 billion in November, down from £2.3 billion in November 2023, according to data released by the Bank of England today
- Mortgage approvals dipped to 65,720 but still remain above the six month average
- Consumers deposited £0.2 billion with banks and building societies in November, down from £18.8 billion in October
Laith Khalaf, head of investment analysis at AJ Bell, comments:
“As we enter 2025, UK consumers appear to be in a cautious mood. Well they might be, with interest rates still high, inflation picking up, and the UK economy still failing to break out of anything more brisk than a sullen plod.
“The latest figures from the Bank of England show that consumer credit grew by £0.9 billion in November, compared to £2.3 billion in the same month last year. That suggests consumers put the Christmas credit splurge on ice in 2024, especially seeing as November is now a key trading month because of discounting trends such as Black Friday, where retailers seek to bring festive spending forward. We’ll be getting trading updates from the UK retailers in the coming weeks which will confirm whether Christmas was a damp squib for the sector. Ahead of higher National Insurance and minimum wage costs bedding in from April, weak Christmas trading would put extra pressure on retail coffers.
“It’s possible consumers ran down savings to fund their early Christmas spending, rather than turning to much more expensive credit facilities. In total consumers saved £0.2 billion with banks and building societies in November, down from a bumper £18.8 billion deposited in October. The much lower figure suggests some may have drawn down savings over the course of November. There was a notable £2.6 billion withdrawal from time deposits, which probably reflects one-year bonds rolling off higher rates and savers deciding current fixed rates were a lesser option to variable easy access accounts, or simply spending the proceeds. October’s figure may have also been artificially inflated by people acting ahead of the Budget, perhaps selling investment funds and properties ahead of a capital gains tax raid and parking the proceeds in cash for the time being.
“Mortgage approvals for house purchases also took a bit of a hit, falling to 65,720 in November, down from 68,129 in October. They still remain above the six month average of 63,823 though, and are significantly higher than the 50,167 recorded in November of 2023. In other reassuring news for the property market, house prices rose by 4.7% in 2024 according to Nationwide. The interest rate shock felt by UK homebuyers may well be gradually wearing off as wages rise, helping to make borrowing more affordable. With interest rates expected to fall this year and demand still outstripping supply, the foundations underpinning house price growth look sturdy for 2025. The one potential blot on the landscape is the prospect that the combination of higher business taxes and recessionary forces lead to a rise in unemployment.”
