Brits racked up an extra £1billion in credit card debt in June as households grappled with rising living costs and falling real wages, new data shows.
Credit card lending grew at its fastest rate since 2005, while amounts deposited into bank accounts fell sharply, the Bank of England reported.
Overall, consumer lending, which includes credit card loans, overdrafts, personal loans and auto financing, rose 6.5 percent annually in June — the fastest rate since May 2019 also saw a 6.5 percent increase.
The annual growth rate of credit card borrowing was 12.5 percent. The Bank of England said it was the highest rate since a 12.6 percent rise in November 2005.
Paul Heywood, chief data and analytics officer at credit information firm Equifax, said: “Higher-income households are increasingly drawing on their savings, reversing a trend seen during the pandemic, while those on lower incomes are turning to the credit industry to help them with their savings Riding to help out of the storm.
“Loan applications are now back to pre-pandemic levels and as the cost-of-living crisis continues to unfold, that demand is going nowhere.
“Lenders need to find ways to responsibly and comprehensively meet this demand and should use data where possible to counteract the urge to retreat to the prime end of the market.”
Karim Haji, UK Head of Financial Services at KPMG, said: “Major UK banks have not reported a major deterioration in credit quality this week, but they are aware of the need to support the most vulnerable customers in what is a highly challenging second half of this Year.
“Meanwhile, reports from other parts of the economy, such as supermarkets, suggest people are cutting back on spending as much as possible to deal with rising costs.”