Higher rates not yet a muzzle on Brits’ borrowing

JACK BARNETT

THE EFFECTS of the Bank of England’s aggressive interest rate rises have yet to fully feed through the UK economy as Brits continue to borrow and look to get on the property ladder, official data has shown.

A clutch of numbers released by the Bank of England yesterday revealed consumers are not yet being deterred by higher interest rates, with credit card spending up £1.7bn in June, above the £1.1bn increase in May.

That was the highest monthly increase since April 2018 and far above City expectations of a £1.3bn jump.

Approvals on home loans for property purchases hit 54,700 in June, up from 51,100 in May, a surprise to markets which thought they would fall to 48,000. Some potential buyers may have rushed to secure a loan ahead of an anticipated spike in mortgage rates.

June’s credit numbers suggest the demand side of the economy is yet to be influenced fully by the Bank’s 13 successive interest rate rises.

“The drag from higher interest rates continues to weigh on the housing market, but other areas of the economy appear to [be] resilient,” Ashley Webb, an economist at Capital Economics, said.

Mortgage rates started to tick back up in June before rocketing higher after a worst-than-expected inflation print of 8.7 per cent. That sent two-year and fiveyear mortgage rates above their post mini-budget levels.

Higher home loan costs have prompted economists to forecast UK house prices could slide around 10 per cent from their peak and that a recession may still hit the country.

Latest numbers showed inflation fell quicker than projected in June to 7.9 per cent. Mortgages rates have receded slightly in response.