By Chris Dorrell
Households borrowed more than expected in November as consumers continued to splash the cash despite the higher cost of borrowing.
Data from the Bank of England showed that consumer borrowing rose to £2bn in November, up from £1.4bn the month before and ahead of the £1.3bn pencilled in by analysts.
The increase was mainly driven by higher borrowing on credit cards, which doubled to £1bn in November compared to the previous month.
Some of this may have financed spending on Black Friday Deals and early Christmas presents. Other forms of personal credit, such as personal and car loans, increased slightly from £900m to £1bn.
The data suggests that, so far, households are continuing to spend despite the pressure from higher interest rates.
“If November’s unexpectedly strong increase in lending is maintained, this could present an upside for consumer spending growth this year,” Martin Beck, chief economic advisor to the EY Item Club said.
The trend of savers moving more money into interest-bearing time accounts, where funds are locked away for a certain period of time to earn a higher return, also continued in November.
Both ISAs and time deposits saw inflows of £3.7bn, which were partly offset by £2.6bn of outflows from easy access accounts.
Ashley Webb, UK economist at Capital Economics, said “higher interest rates continued to encourage households to squirrel money away.”
The figures also showed that the money flow dipped into negative territory again in November, with M4ex – a measure of broad money – falling by £3.2bn.
This reversed a rapid increase in October, of £13.4bn, although the money supply had been contracting for the previous two months.
Before August, the money supply had never been in contraction, according to the Bank’s records. One group of economists, known as monetarists, argue that a falling money supply risks tipping the UK into a “severe recession.”
