In its report on the outlook for financial services it said household lending was currently growing at a rate of 1.6% and was expected to increase only marginally to 2.4% by the end of the year.
This is much slower than the growth rate of 5.8% which was seen during the early stages of the recovery following the recession of the early 1990s.
And predictions of annual growth in lending over the next three years of 4.2%, paint a subdued picture in comparison to the 6% growth seen in 1997, five years into the recovery of the 1990s.
Bank business lending has also failed to match growth rates seen in the recession of the 1990s.
Ernst & Young (EY) has revised down its annual growth rate in business lending in 2014 from 2.5%, stated in its winter forecast prediction, to 1.5%.
Martin Beck, senior economic advisor to the EY ITEM Club forecast for financial services, said: “Low borrowing is good news for the sustainability of the recovery but bad news for banks’ profitability.
“While the economic recovery will support an expansion in consumer credit there is little prospect of a return to the rapid credit growth of the noughties.”
Beck said banks must continue to exert tight controls on costs and continue to innovate to close the gap with pre-crisis rates of profitability.
