Households repay more than they borrow on credit cards for first time since 2013

Cautious households have paid back more than they borrowed on their plastic for the first time since 2013, Bank of England figures show.

As Christmas approached, the extra amount borrowed by consumers to buy goods and services including on credit cards as well as other types of personal borrowing fell to £563 million in November 2019 – the weakest figure in six years.

Within this total, there was a £120 million net repayment on credit cards, the Bank’s Money and Credit report said.

It marks the first time since July 2013 that a net repayment on credit cards has been recorded and it follows a £413 million increase in October 2019.

Economists suggested wider political uncertainty and lenders’ tougher standards may be behind the decline.

In July 2013, the net repayment on credit cards was £41 million.

The net credit card repayment seen in November 2019 was the biggest since October 2012, when a net figure of £169 million was repaid.

The weak figures meant the annual growth rate of consumer credit, which includes borrowing using credit cards, personal loans and overdrafts, slowed to 5.7% in November, compared with 6.1% in October.

It was the slowest annual growth rate in consumer credit since 2014.

Annual growth in consumer credit has now fallen by 3.7 percentage points since July 2018, when it was 9.4%.

Howard Archer, chief economic adviser at EY ITEM Club, said the net repayment on credit cards was a “particularly notable development”.

Commenting on the Bank’s figures, he said both consumers and lenders have recently seemed more cautious.

Mr Archer said: “There were signs late on in 2019 that consumers had become more careful in their spending as they faced the combination of a struggling domestic economy as well as heightened domestic political and Brexit uncertainties.

“Prior to this they had been pretty resilient – helped by improved purchasing power and recent record high employment.

“Meanwhile, lenders have become more careful about advancing unsecured (non-mortgage) credit – the third quarter of 2019 saw lenders further reduce the amount of unsecured credit available to households and again tighten lending standards.”

The report also said that mortgage market data points to continued stability.

Mortgage approvals for house purchase – an indicator for future lending – were unchanged in November, at 65,000, remaining similar to levels seen in recent years.

Approvals for re-mortgaging fell slightly on the month to 48,400.

Andrew Montlake, managing director of mortgage broker Coreco, said: “Mortgage approvals for home purchase in November were surprisingly robust given the distraction of the general election.

“There’s no doubt that many people saw November as the last chance saloon, a time to get a mortgage agreed before a potentially disruptive election result.”

The Bank said that in the business sector, levels of borrowing from banks and money raised in financial markets were both subdued in November.