Coronavirus Economic Impact Updates
Join myFT Daily Digest to be the first to know about news about the economic impact of Coronavirus.
British borrowing fell in July, facing the expectations of economists as households continue to increase their savings, suggesting that the rise in coronavirus infections in the summer is affecting spending.
UK consumer credit fell to zero last month, the lowest since February and £ 300m in June, according to Bank of England data released on Tuesday.
“[The results] “This is in line with a further slowdown in the economic recovery in July, driven in part by some households falling backwards due to an increase in Covid-19 cases,” said Samuel Tombs, chief economist at the British consultancy Pantheon Macroeconomics.
The decline in lending fell far short of the £ 441m increase polled by economists polled by Reuters.
Meanwhile, households saved an extra £ 7.1 billion in July. Although the amount of money deposited in banks and building societies was lower than in June, it still exceeds the monthly average of £ 4.7 billion in the year before the pandemic.
The BoE data shows’ ‘another sign that increasing virus cases are weakening households’ willingness to spend in July’ ‘, says Ruth Gregory, senior British economist at Capital Economics. “But. . . there is still a lot of room for expenditure to recover strongly further, ”she added.
The total amount saved by British households since the start of the pandemic is about £ 180 billion, or 8.3 per cent of total UK production in the UK.
Martin Beck, senior economic adviser at consultant EY Item Club, said that despite the ‘limited’ recovery in unsecured lending, it remains ‘optimistic’ that lending flows will gradually improve in the second half of 2021 as consumer confidence returns and people enter. a ‘big hope’ too many ‘savings’.
The BoE findings also showed that approvals for home purchases fell to 75,200 in July, from 80,300 in June, the lowest level since July 2020.
The decline in mortgage approvals largely reflects a decline in the threshold at which buyers in England are avoiding the £ 500,000 to £ 250,000 stamp duty, which took effect from 1 July.
“However, confidence remains strong, especially as interest rates remain low,” said Tomer Aboody, director of real estate lender MT Finance.
As the effective rate on new mortgages drops by 12 basis points to 1.83 percent in July, “borrowers are finding that the dream home they may not have been able to afford before is now within reach,” he added.
Despite the setback, mortgage lending remains above pre-February 2020 levels before the first restrictions are imposed on Covid-19.
In July, for the second time in the last decade, households made only a net repayment on their mortgages.
Andrew Montlake, managing director of London independent mortgage broker Coreco, said the net repayment in July was partly due to the end of phase one of the stamp duty holiday and “partly due to the incredibly low interest rates being offered. return in large quantities. ”