Consumer lending jumped to a five-year high last month as more UK households relied on loans to pay bills amid higher living costs, according to new data.

But in better news for the housing market, mortgage approvals ticked up unexpectedly in June despite borrowing costs continuing to rise.

Net borrowing of consumer credit rose to £1.7 billion in June, the highest level since April 2018, according to the Bank of England’s Money and Credit report.

It surpassed analysts’ expectations of £1.3 billion for the month, according to Pantheon Macroeconomics UK.

Borrowing on credit cards remained stable at £600 million, but other forms of credit such as personal loans and car dealership finance doubled from £500 million in May to £1 billion in June, the data revealed.

On the other hand, households deposited more cash into bank accounts last month as savings rates increased.

People put an additional £3.4 billion into banks and building societies, having withdrawn a net £3.1 billion in May.

It reflected an increase in people locking away cash into accounts where they can benefit from interest on their savings, as well as current accounts without interest.

It comes as UK banks have faced pressure from MPs and regulators to pass on higher interest rates to savers, at a time when borrowing costs are spiking.

The effective interest rate on savings – meaning the average actual rate paid on deposits – jumped to 4.29% in June from 3.95%, the Bank of England’s report found.

Richard Lane, director of external affairs at StepChange Debt Charity, said: “At this point in the cost of living crisis, there will be a significant number of households relying on credit simply to meet the cost of their everyday essentials, and with the Bank of England’s figures showing the highest level of consumer credit borrowing since 2018, we expect the knock on effect to be more people at risk of problem debt.

“The rise in interest rates coupled with inflation will have already had a drastic impact on millions of people’s finances, with both mortgage holders and renters seeing unsustainable jumps in their household budgets.”

Victor Trokoudes, chief executive of money app Plum, said: “We may be starting to see people exhaust the savings they built up during the pandemic and instead are being forced to turn to credit to support their day to day spending.”

But he added that other households could be trying to lock in good interest rates on their savings while the Bank’s base rate – which currently stands at 5% – stays high.

Meanwhile, home-buyer mortgage approvals increased to 54,700 in June, the highest number since October last year and above expectations of a fall to 49,000 during the month.

Approvals for remortgaging with a different lender also increased significantly to 39,100 in June, from 34,100 in May, as existing homeowners looked to secure a new deal.

Thomas Pugh, an economist at auditor and consulting firm RSM UK, said: “The rise in mortgage approvals probably represents a scramble to secure a deal before cheaper mortgage products were pulled from the market in the wake of the surge in interest rate expectations at the end of May.

“With interest rates on mortgages continuing to rise, the average two-year fixed-rate mortgage deal broke above 6% in June, we expect the peak in house prices to fall by around 10% with the risk of bigger falls if the base rate rises above 6%.”