Consumer credit borrowing increases at fastest annual rate in five years

Households’ borrowing using consumer credit increased to its highest annual growth rate in five years in November 2023, according to Bank of England figures.

The annual growth rate for consumer credit was 8.6% in November, the highest rate since September 2018, the Bank’s Money and Credit report said.

Consumer credit includes borrowing using methods such as credit cards, personal loans and car finance.

The Bank said that, within the figure, the growth rate for credit card borrowing remained stable.

David Cheadle, acting chief executive of the Money Advice Trust, the charity that runs National Debtline said: “Millions of people are starting the new year feeling unable to cope because of money worries, and with borrowing levels rising, this is a further sign of the financial burden many households are under.”

Richard Lane, chief client officer at StepChange Debt Charity, said: “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.”

Karen Noye, from wealth manager Quilter, said of the growth in consumer credit borrowing: “This is serious cause for concern as relying on this kind of credit to help with regular bills can cause someone to enter into a spiral of debt.”

She said: “Anyone worried about their debt should seek help, there are debt charities out there that can help you to put in place budgets to clear unwanted debt.”

Looking at mortgages, in an indication of future borrowing, there were around 50,100 approvals for house purchases in November last year, marking the highest monthly total since June 2023.

Net approvals for remortgaging, which only capture remortgaging with a different lender, also increased, from 24,000 in October to 27,000 in November.

File photo dated 14/10/14 of estate agent signs (Andrew Matthews/PA)
There were around 50,100 approvals for house purchases in November last year (Andrew Matthews/PA)

However, the annual growth rate for net mortgage lending reached 0.3% in November, the lowest since records started in March 1994.

Emily Williams, director of research at Savills, said: “Buyers who do not have to move are continuing to hold off while the cost of debt remains high.

“Looking ahead, there are encouraging signs for mortgaged buyers. Two and five year swap rates have fallen significantly in the last month, following December’s encouraging inflation figures.

“Several lenders have already cut rates on mortgage products this week as a result, with two-year fixes now available at rates below 5%.

“While we do expect to see more activity from both mortgaged home movers and first time buyers over the next few months, Savills has forecast transactions to remain at around one million in 2024 (slightly below a pre-pandemic norm of 1.2 million), with cash buyers remaining the most resilient buyer group in the short term.”

Simon Gammon, managing partner at Knight Frank Finance, said: “The fall in mortgage rates since late July has stabilised the market and underpinned a moderate recovery in purchasing activity. That said, activity is still well below long run averages and likely won’t recover fully until mortgage rates fall further and wage growth improves affordability.

“The good news is mortgage rates are now falling quite quickly. Lenders have new targets at the start of the year and are locked in a battle for market share in a sluggish market.”

Meanwhile, households’ deposits with banks, building societies and NS&I accounts grew by £3.8 billion in November.

This was higher than the average monthly rate of £3.5 billion over the past six months, but significantly less than the £6.8 billion recorded in October, the report said.

The annual growth rate of borrowing by large businesses was 1.0% in November, down from 2.1% in October.