Unsecured borrowing through loans and credit cards from Britain’s banks is rising at its fastest rate since before the financial crisis, according to figures published on Thursday.
The British Bankers’ Association (BBA) said the value of new consumer credit taken on in November was 5.7% higher than a year previously, the highest since March 2007.
Meanwhile, new mortgage borrowing has risen to its highest level for seven years.
On Tuesday, the Office for Budget Responsibility warned households had moved from the black into the red, and the BBA’s figures show that borrowing has risen more quickly than saving.
The growth in new consumer credit has been driven by a pick-up in credit card spending and in borrowing through personal loans and overdrafts. Personal loan rates have reached record lows in recent months, and banks have been offering their most credit-worthy customers their best ever deals.
The BBA said £1.7bn worth of new lending was made through personal loans during the month, in line with the previous six months’ average, while new spending on credit cards totalled £9.5bn.
Once repayments were taken into account, new borrowing was up by £713m, from £422m in October, putting it at its second highest level since 2007.
Gross mortgage lending hit £12.8bn during the month, in line with October’s figure and 28% higher than a year ago. The two months have seen lending at its highest level since the summer of 2008, when the credit crisis was taking its grip on the housing market.
The BBA said personal deposits into accounts were up by 3.2% year-on-year, but there had been a net outflow of £485m from Isas.
Howard Archer, chief UK economist at IHS Global Insight, said the figures tied in with official data showing a 1.7% rise in retail sales in November.
He added: “The pick-up in unsecured consumer credit in November follows on from data from the Office for National Statistics showing that the household savings ratio dipped to 4.4% in the third quarter of 2015, which was the equal lowest rate since 1963.
“This will fuel concern that consumers are borrowing more and saving less to finance their spending, which is likely a consequence of relatively high consumer confidence and extended low interest rates. This is something that the Bank of England needs to keep a close eye on, and it does appear that some MPC members are becoming more worried.”
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