This week’s briefing covers key developments on several fronts. UK household savings saw a sharp rise in June, but credit card borrowing also increased. Mortgage approvals and remortgaging activity both jumped. Globally, the IMF released its latest growth forecast, and in the US, GDP growth came in well above expectations — but some underlying data raise questions about how long the strength can last.
Keep reading for a closer look at how these trends could shape the months ahead.
Households still cautious, with savings rising
- June saw a significant rise in UK household savings, with Bank of England data showing deposits with banks and building societies rose by £7.8bn, up from £4.3bn in May. That figure comes in well above the six-month average of £5.6bn, suggesting a more cautious mood among consumers.
- Chancellor Rachel Reeves recently calmed nerves during her Mansion House speech, confirming any ISA reforms would be made with industry consultation. But broader concerns seem to be driving the trend. The figures also showed a sharp rise in other types of deposits, reinforcing the narrative that households remain reluctant to splurge while the economic backdrop remains uncertain.
- Speculation around tax hikes at the next Budget isn’t helping consumer confidence. Capital Economics economist Ashley Webb noted the trend aligns with sluggish GDP growth of just 0.1% in Q2. EY ITEM Club's Matthew Swannell added that tighter fiscal policy and lingering effects of past rate hikes are still weighing on real household income.
- Interestingly, though, consumer credit did rise slightly, with £1.4bn borrowed in June versus £0.9bn in May, largely driven by credit card use, suggesting some consumers are still spending.
Mortgage approvals jump, reaching the highest since October 2022
- The UK mortgage market surprised to the upside in June, with approvals rising to 64,167, 900 more than in May, while remortgaging approvals reached 41,800, the highest since October 2022. These Bank of England figures signal renewed activity, particularly among those switching lenders amid shifting rates.
- The surge in remortgaging reflects not just rate-chasing but growing consumer confidence, despite broader concerns around affordability. With net mortgage borrowing rising from £2.2bn to £5.3bn, and gross lending hitting £23.9bn, it seems more buyers are willing to commit again.
- The average interest rate on new mortgages fell for the fourth month in a row, down to 4.34% in June from 4.47% in May. That’s a small but meaningful shift, that, coupled with looser affordability criteria, is helping would-be buyers re-enter the market.
- Nathan Emerson at Propertymark believes recent government signals have helped: “The chancellor’s recent Leeds Reforms sent a positive signal to the mortgage market,” he said, suggesting that lenders might now pivot toward helping lower-income buyers get on the ladder.
- Looking ahead, the Bank of England is expected to cut rates from 4.25% to 4.00% in August, which could inject further momentum. But affordability challenges still persist.
- Matt Swannell of the EY ITEM Club pulled the threads together neatly: “Interest rates are expected to fall further this year and into next... but movement in activity and prices will likely be gradual in the second half of 2025 and into 2026.”
IMF says Global growth is steady, but fragility remains
- The International Monetary Fund has revised up its global growth forecasts, now predicting 3% for 2025 and 3.1% for 2026, thanks in part to “front-loading” of imports by US companies looking to beat rising tariffs. That short-term boost was enough to lift the outlook compared to April’s forecasts of 2.8% and 3% respectively.
- However, the IMF stressed that this momentum is unlikely to last. Import surges may lead to oversupply issues and higher storage costs, creating drag later this year. The IMF’s chief economist Pierre-Olivier Gourinchas, warned of risks from Trump’s tariff policies, even if immediate shocks have been contained for now.
- The UK is still in the mix. Growth here is expected to hit 1.2% in 2025, rising to 1.4% in 2026 — putting the UK behind the US and Canada among advanced economies, numbers that are unchanged from the IMF’s May forecast.
- The US, meanwhile, is seeing faster short-term growth than expected, something we will cover next. The IMF cautioned that their current pace is above trend, and could reverse when the import bubble bursts.
- On inflation, the IMF expects global price growth to fall to 4.2% in 2025 and 3.6% in 2026, with US consumers likely to bear the brunt of tariff-related price increases later this year.
- Gourinchas made the risk plain: “The world economy is still hurting, and it’s going to continue hurting with tariffs at that level, even though it’s not as bad as it could have been.”
U.S. economy beats expectations with Q2 GDP surge
- The U.S. economy grew by 3% annualised in Q2, outpacing expectations of 2.3%, according to the latest figures from the Commerce Department, reversing the -0.5% contraction seen in Q1.
- Consumer spending grew by 1.4%, up from just 0.5% the quarter before, reflecting improved confidence despite ongoing trade uncertainty. Meanwhile, imports plunged by 30.3%, which significantly boosted the overall GDP figure. Exports, on the other hand, fell by 1.8% in the same period.
- One key measure the US Fed watches, final sales to private domestic purchasers, rose by just 1.2%, its slowest pace since late 2022. That suggests underlying demand growth may still be fragile despite the impressive headline GDP figure.
- Inflation metrics, while cooling, are not completely tamed. The PCE index rose to 2.1%, just over the Fed’s 2% target. Core PCE, which strips out volatile food and energy, came in at 2.5%, down from 3.5% in Q1 but still above ideal levels.
- Markets were relatively muted in response, and the Fed is widely expected to hold interest rates in the current 4.25%–4.5% range. Trump, however, called for cuts, saying: “Too Late’ MUST NOW LOWER THE RATE. No Inflation! Let people buy and refinance their homes!”
- Heather Long at Navy Federal summed up the mood: “The word of the summer for the economy is ‘resilient.’ The consumer is hanging in there, but still on edge until the trade deals are done.”
Final Note
This week’s updates paint a picture of resilience under pressure. In the UK, households are treading carefully. Savings are up sharply, even as credit use creeps higher, and for policymakers, this cautious consumer mood will be an important signal in the run-up to next week's rates decision.
Globally, the outlook is just as mixed as at home. The IMF’s revised growth forecasts reflect short-term boosts, particularly in the US, but the longer-term picture remains clouded by uncertainty. The US economy continues to defy expectations, but even there, the strength could seem more superficial than structural.
As ever, while the data tells part of the story, it’s the reaction from households, businesses, and policymakers that will shape what comes next.
At GCV, we’ll continue to monitor those reactions closely and keep you informed along the way. Look out for next week's briefin,g which will include everything you need to know following the Bank of England's crucial rate decision.