“July’s boost in borrowing points to growing consumer confidence to take on more credit, buoyed by a more stable economic and political outlook. The start of the summer holidays, festival season and the summer of sport will have also increased appetite to borrow.
“But July’s rise in inflation, while modest, suggests that we aren’t completely out of the woods. And while consumer confidence hit a three year high last month and some households are reporting improved finances, there are still many that are squeezed by the sharp rise in energy and food prices of the last two years.
“Although domestic inflation pressures are broadly starting to abate, it remains to be seen whether recent falls in service price inflation and slower pay growth will be enough to prevent a temporary climb in headline inflation. And despite this month’s long awaited base rate cut, the Bank will continue to approach future rate cuts with caution, so households will still feel the effects of a higher for longer rate environment, particularly if progress on underlying inflation is insufficient over the coming months.
“Lenders will need to remain vigilant when it comes to new applications for credit and continue to provide the necessary support for those who aren’t yet feeling the effects of an improved economic environment on their finances.”
