Consumer credit borrowing rose sharply in May

Latest Bank of England Money and Credit data has shown that consumer credit annual growth rose to 8.3 percent in May 2024, after a fall in April, with outstanding balances for consumer credit now standing at £1.85 billion.   

Consumer credit borrowing rose sharply in May 2024 to £1.5 billion, up from £0.8 billion in April. This was driven by net borrowing on credit cards rising from £0.2bn to £0.8bn and borrowing on other forms of credit such as personal loans and car finance rose from £0.6bn to £0.9bn in the same period.

The data also showed that individuals borrowed, on net, £1.2 billion of mortgage debt in May, down from £2.2 billion in April. Net mortgage approvals for house purchases fell from 60,800 in April to 60,000 in May, while approvals for remortgaging decreased slightly from 29,900 to 29,600 over the same period.

Commenting on the statistics, StepChange Head of Communications Simon Trevethick said “While the increase in consumer credit borrowing will to an extent reflect an upturn in consumer confidence, we know that millions across the country are struggling to make ends meet, many of whom will be turning to credit out of necessity, not choice. Our own research has found that 8.6 million people – that’s one in six of us – has recently borrowed to keep up with essentials.

“With inflated living costs set to weigh heavily on millions of people’s finances for the foreseeable future, it’s vital the next government has a robust plan to help struggling households become more financially resilient. Actions such as rolling out social tariffs for utilities, urgently addressing drivers of destitution in the benefit system and making the Household Support Fund permanent can help to ensure people on low incomes are better equipped to withstand financial shocks.”

Paul Heywood, Chief Data & Analytics Officer at Equifax said “The latest figures from the Bank of England show a decrease in mortgage lending as the UK continues its bumpy journey back to economic normality.

“While not yet reflected in today’s data, there are growing signs of economic easing – with inflation finally on target for the first time in almost three years and news of high street lenders cutting mortgage rates. However, beneath the surface affordability pressures may persist as consumers continue to navigate the cost-of-living crisis, adding to already increased reliance on overdrafts and persistent growth in highly utilised credit cards*.

Steve Vaid, Chief Executive of the Money Advice Trust, the charity that runs National Debtline, said “With consumer credit borrowing on the rise again, its clear many households are still relying on credit to plug the gaps in their finances.  

“At National Debtline our advisers are hearing daily from people struggling to keep up with their essential costs, but turning to credit to make up the difference risks problems down the line if repayments aren’t affordable.”