Consumer borrowing growth slowed and mortgage approvals slipped further last month according to new figures from high street banks, adding to signs of a wider slowdown.
The British Bankers’ Association (BBA) pointed to the run-up to the election as a factor as it said consumer credit grew by 5.1% in May, down from 6.4% the previous month.
It was the weakest increase since October 2015 and was partly driven by a slowdown in credit card borrowing reflecting worsening retail sales.
Erik Leenders, BBA managing director for retail banking, said: “This month’s figures show that in the run-up to the general election, credit growth in personal loans, cards and overdrafts has slowed, which was reflected in lower spending.”
Weak consumer spending has already helped UK economic growth drop to just 0.2% in the first three months of this year.
The BBA figures also showed that growth in bank deposits and saving slowed in May as households faced a tightening squeeze from accelerating inflation – which reached a near four year high in May – and lower wage growth.
Meanwhile, lenders approved 40,347 mortgages for house purchase last month, down from 40,686 in April and the lowest figure since September.
The data comes a day ahead of the Bank of England’s Financial Stability Report amid speculation that the Bank could tighten rules around credit card lending after voicing concerns about household debt.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the fall in mortgage approvals provided “more evidence that households have become reluctant to make financial commitments now that real incomes are falling again”.
A separate report from the British Chambers of Commerce (BCC) on Monday warned of slowing consumer spending and subdued business investment amid rising inflation and wariness after the election outcome.
The BCC slightly upgraded its economic growth forecast for 2017 from 1.4% to 1.5% – thanks to a stronger global outlook – but said over the next few years it looked set to remain well below historic averages.
However elsewhere, figures from Lloyds Bank reported business confidence at an 18-month high, saying forms were now taking higher inflation and uncertainty “in their stride”.