UK credit card borrowing rises most since 2005 as cost of living squeeze tightens

Buses pass the Bank of England (BoE) building after the BoE became the first major global central bank to hike rates since the coronavirus (COVID-19) pandemic, London, Britain, 16 December 2021. REUTERS/Toby Melville

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  • Consumer credit increases by 11.6% over one year, its highest rate since 2005
  • Borrowing likely reflects worsening cost of living crisis
  • BoE data also points to a possible slowdown in the housing market

LONDON, May 31 (Reuters) – Credit card borrowing in Britain rose last month at the fastest annual rate since 2005, possibly reflecting worsening pressure on the cost of living that could now starting to slow the housing market, according to data from the Bank of England. tuesday.

The BoE said credit card borrowing was 11.6% higher than in April 2021, marking the biggest increase since November 2005.

Overall consumer credit, which includes personal loans and auto finance transactions, grew 5.7% on an annual basis, the fastest growth since February 2020.

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The increase in borrowing came despite business surveys showing signs of a marked slowdown in demand, particularly among consumer-facing businesses.

Households were hit last month by a double whammy of soaring energy costs and rising taxes. The hit to disposable income – probably the worst since modern records began in the mid-1950s – means Britain is at risk of sliding into recession later this year.

Last week, Finance Minister Rishi Sunak announced 15 billion pounds ($18.9 billion) in additional support for households struggling to pay their bills. Read more

“The solid increase in unsecured borrowing in April suggests that households are using credit to support spending as the cost of living squeeze has intensified,” said Nicholas Farr, associate economist at consultancy Capital Economics.

UK credit card borrowing grows at fastest pace since 2005

The BoE figures are not adjusted for inflation which hit a 40-year high of 9% in April, so some of the increase in borrowing likely reflects a price effect.

The data also pointed to a possible slowdown in the UK property market, which has seen house prices rise rapidly over the past two years.

Lenders approved 65,974 mortgages in April, the lowest total since June 2020 and down from 69,531 in March, the BoE said. A Reuters poll of economists had indicated approvals of around 70,000.

“Rising rates and falling real incomes should dampen demand after a period of accommodative monetary policy,” said Karim Haji, head of financial services at accountants KPMG UK.

Mortgage lender Halifax reported that annual price growth slowed to 10.8% in April after hitting a nearly 15-year high of 11.2% in February. Read more

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Reporting by Andy Bruce; edited by David Milliken

Our standards: The Thomson Reuters Trust Principles.

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