Credit card borrowing keeps rising along with cost of life

Credit card borrowing among UK households is accelerating as the increase on last year rose last month while lending to businesses slowed down, official figures show.

Total credit card borrowing in September was 7.8 per cent higher than the same month last year, up from an annual increase of 7.3 per cent in August, according to industry body UK Finance.

Credit card lending by high street banks was 5.5 per cent higher than last year, the report said.

Meanwhile, the lenders’ association said that borrowing by businesses has ‘moderated’ since the beginning of the year.

The slowdown in borrowing was especially marked among wholesalers and retailers as they face the biggest impact by any cutbacks in consumer spending, according to the report.

‘Rising inflation continues to put pressure on household budgets which is impacting consumer spending,’ said UK Finance’s Senior Economist Mohammad Jamei.

‘Businesses remain cautious about the future amidst an uncertain economic environment, reflected by their growing deposit activity and a dip in their borrowing growth rate,’ he added.

It comes as inflation hit 3 per cent last month, the highest in over five years, and follows warnings by the Bank of England over the risks to the economy posed by fast-growing consumer debt.

As households look for ways to cope with the squeeze on their finances caused by surging Brexit-linked inflation, businesses – and especially those which are sensitive to changes in household spending – are taking a cautious approach by limiting their investments.

UK Finances, which represents nearly 300 of the biggest banks and lenders in the UK, said that annual growth in overall consumer credit edged higher from 1.4 per cent to 1.5 per cent in September, which includes borrowing on credit cards, personal loans and overdrafts. 

The report also found that gross mortgage lending rose by 5 per cent on last year to an estimated £21.4 billion in September.