UK Consumers Keep Borrowing Amid Trade Uncertainty, Lending Data Suggests Q2 Growth Resilience

UK consumers continued to borrow and spend with confidence in April, shrugging off fears of an economic slowdown from the ongoing US trade war and a weakening domestic labour market. According to the latest money and lending figures, released by the Bank of England, this resilience is expected to support a 0.4% quarter-on-quarter rise in consumer spending for the second quarter of 2025, according to Capital Economics.

In April, household bank deposits rose by £3.0bn—well below the six-month average of £8.0bn. However, a record £14.0bn flowed into cash ISAs, likely driven by speculation that the Chancellor may soon cut the tax-free allowance for these savings accounts.

Consumer credit rose by £1.6bn, marking a slight acceleration from March’s £1.1bn increase and exceeding the £1.2bn average monthly gain seen over the past six months. This uptick signals that households remain willing to take on debt, even as trade tensions and interest rate uncertainty loom. The robust April retail sales data suggests that higher spending in shops has not come at the expense of borrowing for other purposes.

Mortgage lending, by contrast, weakened sharply. Net mortgage lending—a measure of new lending minus repayments—fell from +£13.0bn in March to -£0.8bn in April, reflecting the impact of buyers rushing to complete purchases before a stamp duty increase on April 1. Mortgage approvals also declined for a third consecutive month, dropping from 63,603 in March to 60,463 in April. This trend suggests the slowdown in house price growth may not be entirely due to one-off timing effects from the tax change, raising risks to Capital Economics’ forecast for a 3.5% annual rise in house prices by the end of 2025.

Despite the backdrop of global trade tensions, there is little evidence that UK consumers are curbing their borrowing or spending. Capital Economics views this resilience as a positive signal that the UK may avoid a contraction in the second quarter, even as wider economic risks persist.