Consumer credit hits five-year high

1st August 2023

Latest Bank of England (BoE) data has shown that consumer credit rose to a five-year high in June. This follows a £500 million decrease in lending in May.

Net borrowing of consumer credit by individuals rose to £1.7 billion in June, the highest since April 2018. Of the £1.7 billion borrowed £1 billion was borrowed for personal and car loans. Credit card borrowing remained stable at £600 million. Net borrowing of mortgage debt by individuals increased by £100 million in June.

Net mortgage approvals for house purchases saw an increase from 51,100 in May to 54,700 in June, while approvals for remortgaging rose from 34,100 to 39,100 during the same period, while approvals for remortgaging rose from 34,100 to 39,100 during the same period.

Commenting on the date, Paul Heywood, Chief Data & Analytics Officer at Equifax said “This morning’s Bank of England figures reveal consumer borrowing habits have bounced back after last month’s dip, increasing to £1.7 billion in June. Despite this return to form in June, we have seen reports that consumer confidence has begun to taper as consumers continue to grapple with higher costs for essential and non-essential items.”

“While we have seen inflation begin to fall this month, an unexpected but welcome result, the Bank’s figures for June show that the impacts of inflation in previous months will likely have a longer-term effect on consumer and business spending habits.”

“It has been good news for mortgage holders this week, as rates begin to slowly drop. However, some mortgage pressures are beginning to show. For those remortgaging, the rates on offer are likely to still be higher than they have been accustomed to in recent years. To soften the blow of these mortgage repayments, we’re seeing homeowners look at extending their mortgage terms.”

“Despite the recent financial turmoil, the UK credit sector is well placed to weather the storm; Equifax and our lending partners are working continuously to provide the support and advice that our customers need to live their financial best and access the credit they need.”

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. Our advisors are consistently reporting a lack of financial resilience among clients, with many struggling to manage multiple debts across consumer credit and household bills.”

“We know that people showing signs of financial difficulty need help as early as possible to prevent them from becoming trapped in a spiral of harmful, unaffordable borrowing. The Consumer Duty, which comes into effect from today, is a chance for lenders to develop appropriate support for their customers and identify when borrowing is becoming unsustainable at the earliest possible stage.”