UK consumer credit rise weaker than expected

Consumer credit rose at its weakest annual pace in nearly four years in June, in another sign that people are reining back on their borrowing after five interest rate hikes since November 2003.

The Bank of England said that net consumer credit rose by £1.28 billion in June, much weaker than the £1.7 billion increase predicted by analysts and following a £2.02 billion jump in May.

That meant that borrowing was 12.5 per cent up on the year, its weakest rate since August 2001. Lending on credit cards was particularly weak, rising by just £335 million, its poorest showing since June 2001. Short sterling interest rate futures ticked higher as markets became even more confident the BoE would cut interest rates next week in order to boost flagging consumer spending.

Growth in mortgage lending was slightly weaker in June, rising by £7.53 billion. That was 10.8 per cent higher on the year, the weakest since March 2002.

Mortgage approvals, loans agreed but not yet made, held steady at 96,000 for the second month running, possibly pointing to stabilisation in the housing market which has slowed sharply since the middle of last year.