In May 2021, UK consumers borrowed more in consumer credit than they paid off.

In what some will see as a further sign that normality is returning after the far-reaching effects of the Covid-19 crisis, the Bank of England’s Money and Credit Report for May 2021 shows net consumer credit borrowing of £0.3 million. This is the first occasion on which a positive monthly net figure has been recorded since August 2020.

Annual growth in the credit market for the 12 months to May 2021 remains negative, at minus 3.2%, but this figure has changed significantly from the minus 5.7% recorded for the 12 months to April.

The effective rate on overdrafts in May was 19.78%, down by 42 basis points since April. This means that overdrafts are now cheaper than at any time since last August. Effective rates on new personal loans in May were 5.61%, down by four basis points compared to April. The area to see a rise in costs was credit cards, where the effective rate increased by 13 basis points to 17.83%.

The figure for net mortgage borrowing continues to fluctuate. After this amount reached a record £11.4 billion in March 2021, it fell to £3 billion in April, but then rebounded to £6.6 billion in May, the last full month for which data are currently available. The £6.6 billion figure is slightly higher than the average figure for the previous six months, and is well above the £4.2 billion reported in February 2020, which might be described as the last month before the effects of Covid struck.

The effective rate on new mortgages rose very slightly from 1.88% to 1.9% in April, continuing the trend of gradual but very small increases since the lowest figure of 1.72% was recorded last August. The effective rate on all outstanding mortgages averaged 2.07% in both April and May 2021 and this remains the lowest figure recorded in this category.

The number of mortgage approvals for house purchases rose slightly from 86,900 in April to 87,500 in May. There was also a slight rise in the number of approvals for re-mortgages, from 33,400 to 34,800, but this figure remains significantly below pre-pandemic levels.