Consumer borrowing jumps again in July

Consumer borrowing grew by an annual rate of 6.9 per cent in July – the highest since March 2019.

The annual growth rate of credit card borrowing was 13 per cent, while other forms of consumer credit rose by 4.5 per cent. These were the highest rates since October 2005 (13.7 per cent) and March 2020 (5.6 per cent), respectively.

According to the latest Bank of England money and credit statistics, £1.4bn was borrowed by consumers in July. This is down from the £1.8bn borrowed in June, but above the 12-month pre-pandemic average of £1bn.

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Of the £1.4bn borrowed by consumers in July, £700m was charged to credit cards and £700m was borrowed via other forms of consumer credit, such as car finance and personal loans.

“The rise in consumer credit borrowing reflects just how strained people’s finances are now becoming amid the cost-of-living crunch,” sad Alice Haine, personal finance analyst at investment platform BestInvest.

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“Savings built up during the pandemic are being used up and people are now turning to credit to maintain their standard of living as soaring inflation, painfully high energy bills and falling real wages eat into disposable incomes.

“Turning to credit – and credit cards in particular – is already becoming the go-to option for many to keep finances afloat. But with real wages declining rapidly and any pay rises to offset that decline quickly swallowed up by persistent price rises, the risk for some is that they find themselves with debt levels that quickly spiral out of control.”

The central bank also revealed that mortgage lending dipped slightly in July, with mortgage debt reaching £5.1bn in July, down from £5.3bn in June. However, this is still above the pre-pandemic average of £4.3bn in the 12 months up to February 2020.

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