The annual growth rate for all consumer credit, which also includes overdrafts, personal loans and car finance, increased to 6.9% in July, which was the highest rate since March 2019 (7.2%)
Credit card borrowing increased at the fastest annual rate since 2005 in July, according to Bank of England figures.
Finance experts pointed to the figures as evidence that households are turning to credit and any savings to cope with ‘painfully high’ bills and falling real wages.
The annual growth rate for all consumer credit, which also includes overdrafts, personal loans and car finance, increased to 6.9% in July, which was the highest rate since March 2019 (7.2%).
Within this, the annual growth rate for credit card borrowing was 13.0%, while for other forms of consumer credit it was 4.5%, the Bank’s Money and Credit report said.
These were the highest rates since October 2005 (13.7%) and March 2020 (5.6%) respectively, it added.
Households were also shoring up less money into their accounts than they did in the months leading up to the coronavirus pandemic.
An additional £4.6 billion flowed into bank, building society and NS&I accounts in July. This was up from £3.0 billion in June, but below the average monthly net flow of £5.5 billion seen during the 12-month pre-pandemic period leading up to February 2020.
Alice Haine, personal finance analyst at investment platform Bestinvest, said: The rise in consumer credit borrowing reflects just how strained people’s finances are now becoming amid the cost-of-living crunch.
Savings built up during the pandemic are being used up and people are now turning to credit to maintain their standard of living as soaring inflation, painfully high energy bills and falling real wages eat into disposable incomes, she said.
Thomas Pugh, an economist at audit, tax and consulting firm RSM UK, said: We expect consumers to reduce their saving over the winter to offset some of the impact of the 80% jump in energy prices that will take effect in October.
Gabriella Dickens, a senior UK economist at Pantheon Macroeconomics, said: The incentive for households to use their savings to pay off debt, instead of supporting their consumption, will grow as interest rates continue to rise.
Access to credit also might tighten if the unemployment rate starts to increase soon, she said.