Concern as consumer credit soars

4th January 2017

The Bank of England has published its latest monthly Money and Credit report, showing consumer credit grew by £1.9 billion in November. The 12-month annual growth rate in consumer credit now stands at 10.8% – its highest since October 2005.

Joanna Elson OBE, chief executive of the Money Advice Trust, the charity that runs National Debtline, said “Consumer credit continues to soar, and this is something we should all be concerned about amidst the current uncertainty over the UK economy. Most people are currently able to handle this extra borrowing, but if the economy does indeed suffer in the years ahead, these extra debts could become even more difficult to repay. We would urge households to review their financial position carefully before taking on any new borrowing, and consider how they would cope with the repayments in the event their circumstances take a turn for the worse.

“The figures are even more stark when you consider that they only take into account some of households’ pre-Christmas spending.  Our research shows that one in three Britons put Christmas on credit – and we are already seeing a surge in people contacting National Debtline for advice as a result.

Research conducted for National Debtline by YouGov recently found that;

  • 11% of British adults (equivalent to an estimated 5.5 million people) say they are likely to fall behind with their finances this New Year as a result of Christmas spending
  • Around one in three British adults (33%) put Christmas on credit this year

In response to the statistics, Peter Tutton, Head of Policy at StepChange Debt Charity, said “Levels of outstanding borrowing on credit cards, personal loans and other forms of consumer credit are approaching the 2008 peak, and the growth rate of net lending is at its highest since 2005. Alarm bells should be ringing. Previous experience shows how such increases in the levels of borrowing can leave households over-indebted and vulnerable to sudden changes in circumstances and drops in income that can pitch them into hardship. Lenders, regulators and the Government need to ensure that the mistakes made in the lead-up to the financial crisis are not repeated and that there are better policies in place to protect those who fall into financial difficulty.”

The Bank of England’s report can be found here.