Consumer and business borrowing soars
There was a huge rise in consumer borrowing and business borrowing in February, while the amount of money that Brits saved plummeted amid the cost of living crisis.
According to the Bank of England’s money and credit statistics, last month consumers borrowed an additional £1.9bn in consumer credit such as personal loans. This included a massive £1.5bn borrowed via credit cards – the biggest monthly hike in at least 30 years.
Consumer borrowing overall was up by 4.4 per cent year-on-year, the largest rise since the onset of the Covid pandemic.
Meanwhile, UK non-financial businesses borrowed £3.5bn from banks in February, up from £1m in January. The average cost of new borrowing from banks by businesses rose to 2.3 per cent last month.
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Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said that the increase in consumer borrowing was “eye-watering” and “a worrying sign of things to come”.
“Enormous numbers of people have cut their costs as much as they feel able to, and are still spending more than they earn,” she said.
“Credit cards feel like a solution in the short term, but when you’re having to pay interest on your debts, it makes it even harder to make ends meet.
“At times of high inflation, the risk is that this pattern will grow. Not only do prices rise even further, but people who need to make a big purchase worry that by putting it off, it’ll just get even more expensive. As a result, they end up borrowing to buy now, and adding to the pile of debt.”
The Bank of England also reported that mortgage borrowing fell from £5.9bn in January to £4.7bn last month, and approvals for house purchases – a key indicator of future borrowing – dropped from 73,800 to 71,000.
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