Sharp rise in credit card spending in May
Credit card spending rose significantly in May, well above the average in 2017, according to figures from supertrade group UK Finance.
The total of 193 million credit card purchases in May was 2.3 percent higher than average of 181 million in the preceding 12 months, reflecting increased retail sales. Outstanding overdraft borrowing was 3.9 percent lower compared to the same time last year.
Mark Pilling, managing director at Spicerhaart Corporate Sales warned that while the rise does reflect greater retail spending, it could hint at wider issues.
He said: “While this could just be a good sign that retail sales are starting to pick up, perhaps as a result of the summer weather and the Royal Wedding, we all know the retail sector is currently struggling, so it could be an indicator of wider issues, that perhaps people are being forced to put more of their day to day purchases on credit cards.
“You can’t read an awful lot from one month’s data, but this is quite a significant rise and it will be interesting to see if this trend continues. If credit card debt does continue to rise, we need to be prepared for the knock on affect this may have on other areas, such as people’s ability to keep up with rent and mortgage repayments.”
Away from retail, estimated gross mortgage lending for the total market in May is £22.2bn, 8.8 percent higher than a year earlier, UK Finance’s data shows.
The number of mortgage approvals by the main high street banks in May has also risen, increasing by three per cent compared to the same month a year earlier. As in April, increased approval numbers were driven by remortgaging, some 18 percent more than a year earlier. In contrast, approvals for house purchase were 3.8 percent lower than the same period a year earlier.
Personal deposits grew by 1.6 percent in the last 12 months, although this was a lower annual rate than seen historically. Deposits held in instant access accounts were 4.4 percent higher than a year earlier.
Eric Leenders, managing director for personal finance at UK Finance, said: “May’s increase in mortgage approvals was driven by strong growth in remortgaging, as a large number of fixed-term mortgages came to an end and homeowners took advantage of a competitive market to shop around for attractive deals. Increased efforts by lenders to contact their customers before their current mortgage deal expires have also contributed to this rise.
“There was modest growth in card spending, reflecting a boost to retail sales amid the good weather over recent bank holidays and the Royal Wedding celebrations.
“However, the overall economic picture remains mixed, as household incomes continue to be squeezed. This may explain the growth of deposits held in instant access accounts, with consumers increasingly choosing to keep their money close to hand.”