Credit card borrowing saw its biggest monthly rise in 30 years last month, in a clear sign that Britons are struggling to deal with a cost-of-living crisis.
New credit card borrowing totaled £1.5 billion in February, up 9.4 per cent in one year, according to the latest Bank of England statistics.
New wholesale consumer credit borrowing – which also includes things like car finance and personal loans – rose 4.4 per cent in one month to £1.9bn.
Turning to credit: Bank of England data shows people may be turning to credit cards again to cover bills
This was double the pre-pandemic average for the 12 months to February 2020, which was £1 billion.
Outstanding balances of consumer credit now total £199.5 billion.
The chief executive of a debt charity said more people will start using credit cards to pay their bills, as the cost of living continues to rise.
Joanna Elson, chief executive of the Money Advice Trust charity which runs the National Debt Line and the Commercial Debt Line, said: ‘Our concern is more people are being pushed into credit to cover higher bills, which could lead to even bigger stockpiling problems in the future. When the payment is due.
“Millions of people are already struggling with the cost of energy, fuel and food – and with days of higher energy prices in April and no respite from further price hikes, this test will only become more difficult.”
Ofgem’s energy price cap will rise on April 1st, which means more bills for 22 million households
In addition to the higher cost of living, lower interest rates may have also led to higher borrowing.
The cost of credit card borrowing was 18.26 percent in February, 29 basis points below the February 2020 level.
The interest rates on new personal loans to individuals decreased by 7 basis points to 6.14 percent, which is 76 basis points lower than the level of February 2020.
Savings have also fallen below pre-pandemic levels. In February, a total of £5.1bn was made available, including deposits with banks and building societies as well as the state savings bank NS&I.
In the year before the pandemic, the combined average monthly savings were £5.5bn.
Interest rates are on the rise for savers, although they are still low.
The effective interest rate paid on new deposits of individuals with banks and building societies rose by 10 basis points to 0.77 percent.
The increase in credit card borrowing comes after the early stages of the pandemic in 2020 saw more people paying huge amounts of debt, as shown in the chart below, completely bucking the long-term trend of credit growth.
Bank of England data showed consumer credit increased sharply in February
Meanwhile, the amount deposited in savings accounts decreased
Mortgage borrowing rose 10.4% in a year
Statistics also showed that the amount borrowed on a typical mortgage has increased by more than 10 percent in a year due to rising home prices.
According to Bank of England statistics, the average mortgage amount was £235,474 in February 2022 – up 10.4 per cent over the same period last year, and up 4.6 per cent compared to January 2022.
Just under 71,000 mortgages were granted in February, which is a decrease of about 3,000 compared to January.
Reclassification approvals were also at their highest levels since the onset of the pandemic.
Many lenders are increasing mortgage rates due to the BoE’s base rate hike, but the BoE’s stats were taken before the latest hike to 0.75 percent last week.
It found that the rate of new mortgages rose 0.1 percentage point to 1.59 percent in February.
Lawrence Bowles, director of research at Savills Estate Agents, said: “With the Bank of England looking to increase the base rate further during the year, we can expect to see a further rise in mortgage interest costs.
This will limit what buyers can pay, especially with affordability stress tests currently in place and rapidly rising energy prices putting pressure on household finances.
Some of the links in this article may be affiliate links. If you click on it, we may earn a small commission. This helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to influence our editorial independence.