Consumer credit borrowing increases at fastest rate in five years

Latest data from the Bank of England shows consumer borrowing rose to £2 billion in November, up from £1.4 billion the month before. This is an increase on the £1.3 billion expected by analysts. The annual growth rate for consumer credit was 8.6% in November, the highest rate since September 2018.

Higher borrowing on credit cards, which doubled to £1 billion in November, was the main driver of the increase, while other forms of personal credit, such as personal and car loans, increased slightly from £900 million to £1 billion.

Commenting on the figures, Richard Lane, Chief Client Officer at StepChange Debt Charity, said “New Money and Credit figures from the Bank of England today show a rise in consumer credit borrowing in November, coinciding with the lead up to the festive season. With January being our busiest time for clients needing debt advice, we know that Christmas can put a strain on people’s budgets and for some can create a spiral of unmanageable debt going into the New Year. Our recent polling showed that of those who borrow money to cover festive costs, one in five (19%) expect it’ll take them more than a year to repay the credit used.

“With more people relying on credit to make ends meet following almost two years of the cost of living crisis, it’s likely that any money borrowed for Christmas will be particularly difficult to repay in the coming months. For anyone struggling with debt from the festive season, you don’t have to suffer in silence as support is out there. StepChange offers free and impartial debt advice, tailored to your personal circumstances – visit stepchange.org to get started.”

Paul Heywood, Chief Data & Analytics Officer at Equifax said “After a post-summer spending slump, consumer credit borrowing rebounded in November as consumers got into the holiday spirit.  

“While we’ll have to wait another month for December’s borrowing figures, the first inflation figures of the New Year are positive. This all-important figure is headed in the right direction, a fact welcomed by retailers who enjoyed their busiest Christmas period since before the pandemic. 

“However, with interest rates remaining high, consumers are still feeling the pinch. The priority for everyone in the credit sector right now should be on affordability. On improving access to credit for those who meet lending requirements, and taking care of those that, by no fault of their own, who find they cannot.” 

Sho Sugihara, CEO and Co-Founder of Fuse said “It’s been a hugely challenging period but it appears that things are set to get even worse for many as struggling households begin to feel the full brunt of increased energy bills, rising mortgage rates and vanishing savings pots after the expensive Christmas period.

“Reliance on credit is spiking at the precise moment that many borrowers are reporting declining access to affordable credit options. Our research shows that a third of lenders (32%) are already reporting an increase in borrower defaults over the last 12 months – however, as households continue to pile up debt there is real fear that these rates will worsen, especially for financially vulnerable people who are twice as likely to end up in debt when taking out new credit products.

“Lenders must ensure that they are fully utilising a wider range of insights to accurately analyse borrower affordability and vulnerability to help protect borrowers at a much earlier stage to prevent defaults.”

Ursula Gibbs, Money Expert at Compare the Market, said “The Bank of England’s latest figures show net credit card borrowing has doubled, from £0.5 billion in October to £1.0 billion in November 2023. Our own research shows that lots of families with children at home are struggling with credit card borrowing as higher energy bills are a major worry.

“Our research from 2023 showed that households now typically need to pay a hefty £5,589 each year for their regular bills – a substantial increase over the past 12 months. Of the households that use credit cards, 76% struggled to repay their monthly credit card in the past six months.”