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Wednesday, Nov 12, 2025

UK consumers cautious about their borrowing as inflation mounts

UK consumers cautious about their borrowing as inflation mounts

British consumers increased their borrowing by less than expected in May in a sign of caution among households as inflation accelerates, Bank of England data showed on Friday.
Lending to consumers rose by 844 million pounds ($1.02 billion) in net terms, a lot less than the 1.3 billion-pounds increase which was the median forecast in a Reuters poll of economists and down from 1.377 billion pounds rise in April.

"With interest rates rising and the squeeze on households’ real wages from higher inflation set to intensify further, we expect borrowing will be weak over the rest of the year," Nicholas Farr, an economist with Capital Economics, said.

BoE Governor Andrew Bailey said on Wednesday it was "very clear" that Britain's economy was at a turning point and was starting to slow.

Inflation has surpassed 9% and is set to peak above 11% in October when power tariffs are due to go up again. Forecasters like the IMF and OECD think Britain will be hit harder by rising prices than other countries.

A survey published by S&P Global on Friday showed reports of rising costs were more widespread among British manufacturers than anywhere else in Europe.

Consumer confidence also last month sank to a record low, according to the long-running GfK survey.

The BoE data also showed lenders increased their mortgage lending in May by the most since September last year,

Net mortgage lending increased by 7.426 billion pounds while new mortgage approvals held roughly steady at 66,163, the BoE said.

The Reuters poll of economists had pointed to a net rise of 4.15 billion pounds in mortgage lending in May and 64,000 mortgage approvals during the month.

($1 = 0.8256 pounds)
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