- Consumer behaviour was increasingly normalising before the Omicron variant emerged, with lending flows strengthening and deposit growth easing in November. These patterns have now likely paused but should resume once the Omicron wave has passed.
- The housing market appears to have settled into a more stable pattern of lower transactions and lending flows now that the stamp duty holiday is over. This trend should continue and is also likely to stabilise price growth.
Martin Beck, chief economic advisor to the EY ITEM Club, says:
“November’s household lending data provided further evidence that consumer behaviour was normalising before the Omicron wave emerged. Net unsecured lending reached a 16-month high of £1.2bn, while both sub-categories also reported their strongest outturns since July 2020. Meanwhile, November’s rise in household deposits was the smallest since January 2020. While some of the downward pressure on deposits will have been caused by the squeeze on household finances, it also appears to be indicative of a more bullish consumer mindset.
“It’s likely that this momentum came to a halt in December, with high-frequency data suggesting that the emergence of the Omicron variant caused greater caution around social consumption activities and lower spending. But the EY ITEM Club expects the recovery in lending to regain momentum once infections come down.
“Now that the stamp duty holiday is behind us, the housing market appears to be settling into a more stable groove. Gross lending recovered in November, after October’s total had been depressed by buyers rushing purchases through before the end-September deadline. This meant that net secured lending rose to £3.7bn, which is likely to represent a ‘new normal’ for the market. Mortgage approvals were broadly stable at 66,964. The EY ITEM Club expects this pattern of lower, but more stable, activity to continue over the next few months, with price growth also likely to stabilise.”