Net £800m in consumer credit borrowed during December – BoE

Individuals across the UK borrowed £800m in consumer credit on net during December, new Bank of England (BoE) figures have revealed.

This figure follows the £1.2bn in borrowed consumer credit that the BoE reported for November.

This latest figure was split between £400m of additional borrowing on credit cards, and £400m in borrowing in other forms of consumer credit, such as personal loans and car dealership finance.

According to the BoE’s latest money and credit statistical release, the annual growth rate for all consumer credit increased to 1.4% in December, up from 0.8% in November. The annual growth rates of credit cards and other forms of consumer credit were 2.0% and 1.1% respectively.

Elsewhere, the effective interest rate on interest-charging overdrafts in December fell 41 basis points to 20.53% after reaching a series high in November, the Bank stated. Rates on new personal loans to individuals fell by 16 basis points, to 6.27% in December, 76 basis points below the January 2020 level, while the cost of credit card borrowing stood at 17.86% in December, 65 basis points below the January 2020 level.

“The amount we owe as a nation on credit cards has been steadily climbing since February last year, when some of the good lockdown habits we all developed of paying down debt, spending less and saving more started to unwind,” commented AJ Bell head of personal finance, Laura Suter.

“The rise in living costs coupled with the squeeze on some people’s income and savings mean that many have had to resort to borrowing again just to pay the bills.

“Now the nation owes £58.7bn on credit cards, which is still significantly lower than the £72bn of debt we were carrying into the pandemic. However, it’s going to keep rising as we head into April, when energy bills climb again, taxes increase and inflation continues its march upwards.”

The BoE’s figures also revealed that net borrowing of mortgage debt by individuals decreased slightly to £3.6bn in December, down from £3.8bn in November. This figure was below the Bank’s pre-pandemic average of £4.2bn in the 12 months to February 2020.

Approvals for house purchases, which the BoE uses as an indicator of future borrowing, increased slightly to 71,000 in December, above the 12-month average up to February 2020 of 66,700.

Remortgage approvals, which only capture remortgaging with a different lender, also climbed slightly to 44,900 in December. This remains low compared to the 12-month average up to February 2020 of 49,500, but is the highest figure since February 2020 of 52,500.

“Although net mortgage borrowing was down slightly on November’s figures, the year ended on a positive note,” said Just Mortgages national operations director, John Phillips. “This optimism is based on approvals in December, which confirm that interest in purchasing property is here to stay.

“Now we have a full picture of last year, we can see the shape of the market. It was a year of turbulence, with spikes in activity, but the main takeaway is that 2021 was the year of the broker. With stamp duty deadlines and criteria changes aplenty, brokers did an exceptional job supporting clients to find the right mortgage.”

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