Key Takeaways
- British consumer borrowing rose by £2.08 billion in November, the most in two years
- The annual rate of consumer credit growth reached 8.1%, the fastest since May 2024
- The increase in consumer borrowing suggests household demand remained solid ahead of the budget
- The number of mortgages approved by British lenders for house purchase fell to 64,530 in November
- The data suggests that speculation about tax rises ahead of the budget did not significantly influence households’ spending decisions
Introduction to Consumer Borrowing
The latest data from the Bank of England has revealed that British consumer borrowing rose by £2.08 billion in November, marking the largest increase in two years. This surge in borrowing has been seen as a sign that household demand remained strong in the lead-up to the budget announcement by finance minister Rachel Reeves. The increase in consumer borrowing was higher than forecast, with economists predicting a more modest rise. The annual rate of consumer credit growth has now reached 8.1%, the fastest pace since the 12 months to May 2024.
Analysis of the Data
The data suggests that households in the UK are continuing to borrow and spend, despite speculation about potential tax rises ahead of the budget. According to Alex Kerr, UK economist at Capital Economics, "Today’s release adds to the evidence that speculation about tax rises ahead of November’s Budget didn’t influence households’ spending decisions too much." This is a significant finding, as it indicates that consumers are not being deterred from borrowing and spending by the prospect of higher taxes. However, Kerr also notes that this suggests there may not be much scope for a pick-up in consumer spending in 2026, as households may be reaching their borrowing limits.
The Budget and Tax Rises
The budget announcement by Rachel Reeves on November 26 included £26 billion in tax rises, although the introduction of most of these increases was delayed. This move was seen as an attempt to balance the need to raise revenue with the need to support economic growth. The delay in introducing the tax rises may have helped to mitigate the impact on consumer spending, as households were not faced with an immediate increase in taxes. However, the long-term effects of the tax rises remain to be seen, and it is unclear how they will impact consumer behavior in the coming months.
Mortgage Approvals
In addition to the data on consumer borrowing, the Bank of England also reported that the number of mortgages approved by British lenders for house purchase fell to 64,530 in November. This represents a decline from the 65,010 approvals seen in October, although it is still in line with the forecast of 64,400 mortgage approvals made by economists polled by Reuters. The slight decline in mortgage approvals may be a sign that the housing market is beginning to slow, although it is too early to say for certain.
Implications of the Data
The data on consumer borrowing and mortgage approvals has significant implications for the UK economy. The strong growth in consumer borrowing suggests that households are continuing to drive economic growth, although there are concerns about the sustainability of this trend. The delay in introducing tax rises may have helped to support consumer spending in the short term, but the long-term effects of the tax rises remain to be seen. The decline in mortgage approvals may be a sign that the housing market is beginning to slow, which could have implications for the broader economy. Overall, the data suggests that the UK economy is continuing to grow, although there are potential risks and challenges on the horizon.
Conclusion
In conclusion, the latest data from the Bank of England has revealed a significant increase in consumer borrowing, with households borrowing £2.08 billion in November. This surge in borrowing has been seen as a sign that household demand remained strong in the lead-up to the budget announcement. The data suggests that speculation about tax rises ahead of the budget did not significantly influence households’ spending decisions, although there may not be much scope for a pick-up in consumer spending in 2026. The decline in mortgage approvals may be a sign that the housing market is beginning to slow, although it is too early to say for certain. Overall, the data has significant implications for the UK economy, and will be closely watched by policymakers and economists in the coming months.