Credit card borrowing surged at its fastest annual rate in 17 years, the Bank of England reported on Tuesday.
The Bank of England highlighted that consumers borrowed an extra £1.4 billion in consumer credit, with £700 million of new lending added on credit cards as the cost of living crisis continued to swallow consumer wallets whole.
“Brits borrowed another £1.4bn in April to help keep themselves afloat during the cost of living crisis,” said AJ Bell head of personal finance Laura Suter.
“It marks the third consecutive month where borrowing has been higher than £1bn. Another £700m was borrowed on credit cards in April, an 11.6% rise in consumer credit – its highest level in more than 16 years, since November 2005.”
The institution mentioned that large non-financial businesses’ borrowing from banks grew to £2.7 billion in April compared to £1.8 billion in March, alongside repayments from small and medium-sized businesses of £500 million in bank loans.
Private non-financial companies redeemed approximately £1.9 billion in net finance from capital markets.
The Bank added that the net flow of sterling money decreased to £1.5 billion in April from £24.4 billion in March, while households’ holdings of money saw net flows of £5.7 billion in April against £6.6 billion in March.
Meanwhile, the net flow of sterling lending to the private sector or companies decreased to minus £3.4 billion in April, compared to £21.1 billion month-on-month.
However, UK consumers were also saving at a higher level than before the pandemic, with £5.7 billion saved by households in April and £600 million with NS&I, representing a 15% growth against the pre-Covid-19 average.
“What the figures show is a divided nation, with many households still managing to save cash despite prices rising around them,” said Suter.
“It’s a far cry from the bumper savings the nation was making during lockdown, but with the prospect of tougher times ahead lots of households have tightened their belts and saved some cash in their emergency funds.”
Inflation is far beyond the Bank of England’s aim of 2%, with the figure currently at 9% and estimated to hit 10% in October. The cost of living looks set to rise, which will make saving even harder for struggling families and will most likely see the rate of credit card borrowing continue to climb.