Britons turned cautious with credit in July as COVID-19 cases mounted

British consumers curbed their borrowing in July in the face of rising COVID-19 cases that forced many more people to self-isolate, and homeowners made a rare net repayment on their mortgages, Bank of England data showed.

Consumer borrowing showed the weakest performance since February, when Britain was in the grip of a third coronavirus lockdown, showing a 42 million-pound ($57.8 million) net repayment of credit.

The fall compared with a median forecast for an increase of 441 million pounds in a Reuters poll of economists.

There have been other signs that Britain’s economic bounce-back slowed in July, when the spread of the Delta variant of the coronavirus led to a surge in people who had contact with someone who tested positive being required to self-isolate. Those rules have since been relaxed.

Data released earlier this month showed caution on the part of shoppers in July. A separate survey last week pointed a rebound in retail sales in August.

Samuel Tombs, an economist at Pantheon Macroeconomics, said consumers were likely to remain in cautious mode.

“With COVID-19 cases likely to pick-up again over the coming months, we continue to doubt that households will draw on their excess savings or borrow significant sums to finance expenditure over the next six months,” he said.

The BoE data showed net mortgage repayments stood at 1.4 billion pounds in July, only the second time in the past decade that repayments have been bigger than borrowing after an unprecedented 17.7 billion pounds of net borrowing in June.

The leap in June was fuelled by an approaching deadline for a tax incentive for buyers that was part of finance minister Rishi Sunak’s package of emergency pandemic support measures.

Nonetheless, the Reuters poll of economists had pointed to slower but continued growth in mortgage borrowing in July of 3.1 billion pounds.

Under the tax incentive scheme, the first 500,000 pounds of any property purchase in England or Northern Ireland was exempt from stamp duty until the end of June. Similar measures were offered in Scotland and Wales.

A 250,000 pound tax-free allowance is now running until the end of September in England and Northern Ireland.

The BoE said British lenders approved 75,152 mortgages in July, the lowest in a year.

A Reuters poll of economists had pointed to 78,600 approvals.