Credit card borrowing in the first 11 months of 2015 has already overtaken lending in the the whole of 2014, dashing concerns that UK banks are failing to lend to businesses and households.
Fresh figures from the British Bankers’ Association (BBA) show UK consumers borrowed £101.3bn on their credit cards in the first 11 months of 2015, up from £90.8bn in the same period of last year and lapping the £101.1bn recorded across the whole of 2015, as Britain’s consumer-driven recovery gathers steam.
Christmas shoppers used credit cards 171.5m times in November, up from 148.3m in the same month of 2014.
Credit card debt has risen by £1.6bn year-on-year to £41.9bn, far outpacing the £564m increase reported in 2014. However, the BBA highlighted that the majority of Britons pay off their credit card bills each month, so the higher debt level is actually down to rising numbers of consumers choosing to pay with plastic, rather than higher personal debt.
Meanwhile, home owners borrowed £13.1bn in November, up 30pc on the same period last year. October, however, remains the biggest month for mortgage borrowing since 2008, with lending totalling £14.2bn.
Outstanding mortgage debt increased by £2.2bn between October and November, and is £16.4bn higher than it was 12 months ago.
While the figures indicate that British consumers and households are increasingly confident in the state of the economy and of their finances, economists fear borrowers could be taking on too much debt.
Photo: Bloomberg News
“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,” said Howard Archer, chief economist at IHS Global Insight.
“This is something that the Bank of England needs to keep a close eye on, and it does appear that some monetary policy committee members are becoming more worried. In considering borrowing, consumers need to allow for the fact that interest rates will likely start to rise during 2016, even if the increases are likely to be gradual and limited compared to past norms.”
Lending to businesses that are not in the finance sector slipped by £300m in November, although lending is still up by £1bn so far this year.
Big businesses also are increasingly choosing to raise money by selling corporate bonds to investors, rather than taking out loans from banks, with £23.2bn raised so far this year on the capital markets.