Consumers embarked on their biggest borrowing spree since before the recession during September, giving the Bank of England's £80bn efforts to revitalise lending a major boost.
Shoppers took on an extra £1.2bn in personal loans and credit card debt during the month, the largest jump for a single month since February 2008, according to the Bank. The borrowing surge came against a backdrop of easing pressure from inflation, which fell to 2.2 per cent, its lowest level for more than three years, last month.
The Bank's surprisingly buoyant lending figures also revealed a £491m jump in mortgage lending during the month, while loans for house purchases also topped the 50,000 mark for the first time since May.
The data mark the strongest evidence yet that the Bank's Funding for Lending scheme, which allows banks and building societies to access funds at rock-bottom prices in return for growing credit, is finally beginning to gain traction after a slow start. It also comes as a fillip for the Bank's Monetary Policy Committee after a stronger-than-expected 1 per cent bounce for the economy between July and September, partly flattered by a Jubilee-impacted second quarter.
Signs the FLS is beginning to have an effect may also stay the hand of the Bank's rate-setters from expanding their £375bn quantitative easing programme next week.
Experts were surprised by the 4 per cent jump in mortgage approvals to 50,024, while the average lending rate on new mortgages fell from 3.84 per cent to 3.77 per cent.
The picture for business lending was more mixed, echoing the MPC's view that the impact of cheap funding lines would make themselves more readily apparent in home loans than business credit. The figures showed a £900m drop during the month – albeit a shallower decline than the £2.2bn squeeze on business loans seen in August.