Credit card borrowing surged last month as households faced up to rising costs across the economy while mortgage approvals fell sharply to levels not seen since before government aid for the housing market was introduced.
Bank of England data showed consumers borrowed a net additional £706m during October – a sum dominated by £637m in new credit card borrowing.
The Bank’s Money and Credit report also showed a hit to average savings rates during the month as households got to grips with a leap in the rate of inflation.
The consumer prices index (CPI) measure hit 4.2% – its highest reading for a decade – in October.
The month saw a 12% increase in the energy price cap and record fuel prices, while the cost of fashion was among other essentials to squeeze consumer spending power.
The Bank’s data also showed that lenders approved 67,199 mortgages in October – down from 71,851 in September.
Economists polled by Reuters had expected the number to remain almost flat.
Market participants said the number reflected the end of the stamp duty holiday in England and Northern Ireland.
Similar support for the market in Scotland and Wales concluded earlier.
The market is now expected to cool down in the months ahead following sustained record prices – also aided by the coronavirus crisis era ‘race for space’ – though a lack of homes for sale is one factor helping to support values.
There is also growing expectation that the Bank will act next month or in February to cool inflation expectations by raising interest rates.
Managing Director of Sirius Property Finance, Nicholas Christofi, said: “The combination of a stamp duty holiday wind down and, more recently, premature fears around an increase in interest rates, were both widely predicted to dent mortgage approval levels towards the back end of this year. So today’s figures will come as no surprise to anyone.
“They certainly aren’t a reason to panic and mortgage approval levels in October are only marginally lower than the monthly average seen over the last five years.
“While an increase in rates is likely to materialise early next year, the cost of borrowing will remain very low and so we don’t anticipate any significant drop in buyer demand as a result.”
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said he expected households to continue squirrelling money away in the coming months despite the slowdown in saving.
He said: “Households set aside into savings accounts in October the smallest sum since the pandemic began, though the emergence of the Omicron variant likely will ensure that they remain cautious over the coming months.”