Pandemic effect on mortgages, credit card spending and savings begins to wane

Credit card spending returned to more normal levels in November (PA Archive)

Consumer spending and borrowing patterns are normalizing after being distorted by government support during the pandemic.

New data released by the Bank of England showed a rebound in credit card spending, declining household savings and mortgage loan levels returning to more normal levels.

The British borrowed £ 1.2bn in November, the bank said, including £ 900m in credit cards. This is the highest total since July 2020 and in line with pre-pandemic averages. People have cut back on their credit card spending during much of the pandemic amid concerns about bills and job prospects.

Thomas Pugh, economist at RSM UK, said: “Combined with stronger retail sales data for November, this suggests that consumer spending was reasonably strong in November. But that could simply have been caused by earlier Christmas shopping, and it seems obvious that the emergence of the Omicron variant pushed consumers back in December and January.

Elsewhere, households collectively saved £ 4.5bn in November, down from the six-month average of £ 7.9bn. Generous government support, like time off, combined with lower spending with people trapped at home has driven up savings during the pandemic.

Demand for mortgages slowed after a government-fueled boom. Banks loaned £ 3.7 billion against houses in November, which was broadly in line with pre-pandemic levels. 67,000 mortgages were approved during the month.

Jeremy Leaf, North London real estate agent and former residential chairman of RICS, said: “These figures show the housing market is heading into ‘more normal territory’ as mortgage approvals return to near their averages before Covid. “

Total November mortgages were £ 2.9 billion below the 12-month average through June 2021. A stamp duty holiday, which ended in September 2021, spilled fuel on the housing market and caused a boom in demand. As a result, prices have skyrocketed, but growth is expected to slow this year.

The interest rate paid on new mortgages fell 9 basis points to 1.5% in November, the lowest average on record. Costs will have risen since then, with the Bank of England raising interest rates for the first time in three years last month.

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