Household credit card borrowing rose to its highest level in more than 16 years in April, suggesting more Britons are going into debt as the cost of living crisis deepens.
Britons borrowed a total of £1.4 billion on credit cards, overdrafts, personal loans and car financing in April, the third month in a row that borrowing was above £1 billion, according to new data from the Bank of England.
Of the total borrowing, £700m was taken from credit cards. This represents an annual increase of 11.6 per cent – the highest level since November 2005.
Cost of living crisis: The latest financial and credit figures suggest that Britons are borrowing more to protect their lifestyles from rising inflation.
In contrast, net mortgage borrowing fell 36 per cent, from £6.4bn in March to £4.1bn in April, suggesting that the British property market may be cooling off.
BoE figures also show mortgage approvals for home purchases fell from 69,500 in March to 66,000 in April.
Meanwhile, the annual growth rate for all consumer credit, including credit card borrowing, overdrafts, personal loans and auto financing, rose from 5.4 percent to 5.7 percent.
However, while credit card debt is on the rise, many Brits are still able to get away with cash.
A total of £5.7bn was made available in banks and building societies in April, along with a further £600m with state-owned savings bank NS&I.
Collectively, this was about 15 percent higher than the pre-pandemic average.
Laura Souter, head of personal finance at investment platform AJ Bell, said: ‘As a country, we’ve now put over £3 billion on credit cards in the last three months, and a further £1.6 billion on other forms of credit, including personal loans. and auto financing.
What the numbers show is a divided nation, with many families still able to save cash despite the rising prices around them.
“Although a far cry from the ample savings the nation was making during lockdown, with the potential for tough times ahead, a lot of families have tightened their belts and saved some cash in their emergency funds.”
Are we witnessing a slowdown in the real estate market?
Both mortgage loan numbers and approvals are now slightly below their pre-pandemic averages for the 12 months through February 2020.
The slowdown comes at a time when mortgage rates are surging and consumer inflation is at a 40-year high of 9 percent.
Prices for the cheapest fixed-rate mortgages have more than doubled since October last year, according to an analysis by mortgage broker L&C Mortgages.
The data shows that the cheapest two-year and five-year average fixed prices are now well above 2 percent at 2.36 percent and 2.46 percent, respectively, having risen from historical lows of 0.89 percent and 1.05 percent, respectively, in last october.
Hina Bhudia, partner at Knight Frank Finance, said: “Activity among buyers is subsiding because the cost of living is shrinking the pool of buyers.
“Some products have doubled in price in the past 12 months and there is a real sense of urgency among many borrowers who feel they must act soon or reassess what they can afford.”
Jeremy Leaf, North London estate agent and former RICS Chairman, adds: “Mortgage approvals are always a good leading indicator of the direction of the housing market.
This latest cut confirms what we’ve seen at the sharp end over the past few months – consecutive monthly increases in the cost of living plus interest rates undermine confidence to take on additional debt and have an inevitable detrimental effect on price growth.
Mortgage approvals for moves in the next few months fell to 66,000 in April – below the pre-pandemic average of 66,700.
While this marks the third consecutive monthly decline in the number of mortgage approvals, fears of a housing collapse remain far fetched, according to those in the industry.
Almasuddin, founding director of Revolution Brokers, said: “Approval levels may be causing alarm bells to set off across the UK property market, particularly the sharp ones we have seen today.
But it’s fair to say that this homebuyer heat wave actually ended last year, when mortgage approvals peaked at 86,000 in May.
Since then, we’ve seen the market settle at around 70,000 approvals per month, give or take, and those last numbers are far from surprising, bringing us back to pre-pandemic market conditions.
“So there’s certainly no reason to run for the hills in fear of a real estate market crash on that score.”
Best mortgage rates and how to find them
Mortgage rates skyrocketed as the Bank of England’s base rate rose rapidly.
If you are looking to buy your first home, move or remortgage, or are a buy-to-let owner, it is important to get good mortgage advice from a broker who can help you find the best deal.
To help our readers find the best mortgage, This is Money has partnered with an independent, no-fee L&C broker.
The Mortgage Calculator backed by L&C allows you to filter deals to see which ones fit your home value and deposit level.
You can also compare different durations of mortgage rates, from two-year fixes, to five-year fixes and ten-year fixes, displaying monthly and total costs.
Use the tool at the link below to compare the best deals, factoring in fees and prices. You can also start an online application on your own time and save it as you move forward.
> Compare the best mortgage deals available now
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