The growth in borrowing on loans, credit cards and overdrafts slowed in May, figures from UK banks have shown, following fears of runaway debt levels.
Personal debt grew at an annual pace of 5.1% in May compared with 6.4% a month earlier, the British Bankers’ Association (BBA) said.
Borrowing through loans and overdrafts has decelerated in particular since the start of the year.
However, individuals are putting little money aside in savings.
Personal deposits in the major UK banks grew at a rate of 2.6% in the year to the end of May – the slowest annual growth rate in saving since December 2011.
There have been fears raised about the growing level of personal debt in the past year, with both the City regulator – the Financial Conduct Authority – and the Bank of England declaring “vigilance” over the issue.
Yet there has been a recent slowdown recorded by the major banks which has been reflected in less spending in the shops.
The annual growth rate in personal loans and overdrafts fell from 6.3% at the end of April to 4.8% by the end of May.
Eric 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; with increased household costs affecting growth in deposits and saving.”
The squeeze on personal finances, owing in part to the rise in the rate of inflation, was also in evidence with a slowdown in mortgage levels, the BBA figures show.
The number of mortgages approved for house purchases was 3.3% lower in May this year than the same month a year ago, at 40,347.
Estate agent Jeremy Leaf said: “Last May the housing market was still reeling from the imposition of the 3% stamp duty surcharge on second homes so we would have expected approval numbers to have been considerably above where they were this time last year.
“Looking forward, there is no indication that we will see a bigger correction in the property market, just a continuation of what we have seen over the past few months – more cautious trading and more realism among buyers and sellers.”
Remortgaging levels also dropped over the same period, with approvals down 10% to 24,248, the BBA figures show.