Many households have built up pots of savings throughout the pandemic
Consumers borrowed more than they had been paid for for the first time since August 2020, according to figures released by the Bank of England.
Personal loans, overdrafts and credit cards, often referred to as net consumer borrowing, reached £280 during May.
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This represents a change in previous trends as many people are paying back more than they borrowed using consumer credit.
The amount allocated by households to deposits fell in May from an average of £16.5 billion for the six months ended April 2021 to £7 billion.
Meanwhile, net mortgage borrowings were recovered to £6.6 billion in May, making them appear stable.
The Bank of England said weeks of volatility has come before, as families expected conclusions on stamp mission holidays.
Laith Khalaf, a financial analyst at AJ Bell, believes that old habits will die violently when it comes to consumer spending “unless the lockdown is enforced.”
“Borrowing is on the rise and savings are on the rise. With the lifting of social restrictions, consumers are now reaching their wallets. Data is from last month, so the key lockdowns are in place. It spans the easing day. Since May 17th, hospitality and leisure businesses have been swinging more fully, so we can expect the spending trend to accelerate ever since,” Khalaf said.
Many households have built up pots of savings throughout the pandemic.
“Unfortunately, these savings make little money from the bank. Inflation is currently rising and in fact they are actually losing their purchasing power more quickly. In fact, the Bank of England will be in the second half of this year. We expect inflation to be above 3%, which could still prove to be a conservative estimate,” Khalaf said.
“Cash is still the only option for money spent in the short term, but current accounts on High Street are particularly likely to offer disastrous interest rates, so it’s worth a little more shopping. 5-10 For money that is not used for long-term use for more than a year, the stock market may provide better protection from inflation for those who can withstand the ups and downs.”
