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Peer2Peer Finance News | September 23, 2019

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Consumer credit growth slows, but 3.3m Brits are in “persistent debt”

Consumer credit growth slows, but 3.3m Brits are in “persistent debt”
Kathryn Gaw

THE GROWTH rate of consumer borrowing slowed to its lowest level in more than a year according to the Bank of England, as Citizens Advice warns that millions of Brits are in “persistent debt”.

The annual rate of growth for consumer borrowing fell to 9.8 per cent in July, the lowest rate of expansion since April 2016. Suggests that the recent squeeze on wage growth and interest rates has encouraged people to tighten their spending, and may have eased the reliance on credit cards, overdrafts and personal loans.

Read more: Demand for personal loans continues to grow

However, new data released by Citizens Advice suggested that there could be as many as 3.3 million people in “persistent debt” across the UK. The advice charity also found that one in five Brits who are struggling with debt have had their credit card limit automatically increased, compared with just 12 per cent of credit card holders overall, and called for a ban on this practice.

“It is clear that irresponsible behaviour by some lenders is making people’s debt situation worse – such as offering more credit when they already have thousands of pounds of unpaid debt,” said Gillian Guy, chief executive of Citizens Advice. “The regulator must ensure that lenders are taking into account people’s whole financial and personal situation before agreeing further credit.

“Banning firms from raising existing customers’ credit limits without seeking their express permission first would also help people take more control over their finances.”

Read more: Brits increasingly pessimistic over finances

Consumer credit increased by £1.2bn last month, representing the smallest rise this year. However, total unsecured borrowing by consumers is at its highest level since the financial crisis, at more than £201.6bn.

“Given that credit is still rising fairly strongly, it suggests that households are confident enough to borrow in order to maintain spending while real incomes are being squeezed,” said Paul Hollingsworth, a UK economist at consultancy firm Capital Economics.

Read more: Consumer spending hits four-year low