UK consumer lending rises at fastest pace since July 2018, BoE says

LONDON, July 29 (Reuters) - British households increased their borrowing at the fastest annual pace in almost eight years last month, adding to signs that consumers were in a more free-spending mood just before new Prime Minister Andy Burnham took office.

Net consumer lending rose by £1.807 billion ($2.40 billion) on the month, up from a £1.723 billion rise in May and above economists' median forecast of £1.7 billion in a Reuters poll, Bank of England data showed on Wednesday. That pushed annual growth to 9.1%, the fastest since July 2018.

Official data released last week showed retail sales volumes grew by a faster-than-expected 4.2% in the 12 months to June — partly due to hot weather and the soccer World Cup bolstering demand for fans, summer clothing and alcohol and snacks.

"That momentum will likely carry through to July as the sunshine and the World Cup gave consumers a welcome distraction from economic realities. June's rise in borrowing suggests many turned to credit to foot the bill," said Karim Haji, global head of financial services at accountants KPMG.

Market researcher GfK's long-running consumer confidence survey strengthened to a six-month high this month, helped by hopes that the U.S.-Iran conflict would stabilise and bring down energy costs.

Paul Dales, chief UK economist at Capital Economics, said the BoE data suggested households might be funding higher spending by dipping into their savings.

British lenders approved 58,200 mortgages for house purchase in June up from 56,565 in May, while net mortgage lending — which lags approvals by at least a month — rose by £7.7 billion, the most since March 2025. Economists polled by Reuters had forecast a median 57,100 approvals and £3.95 billion of lending.

The BoE is widely expected to keep interest rates unchanged at 3.75% when it announces its July rate decision on Thursday. Most economists do not expect rates to rise for the rest of the year, although financial markets think a quarter-point increase is likely by November.

Mortgage lender Nationwide Building Society previously reported a 2.2% annual rise in house prices for June while rival Lloyds reported a more modest 0.6% increase.

(Reporting by David MillikenEditing by William Schomberg)