BoE: Consumer borrowing soared in April
The annual growth rate of consumer borrowing soared in April as individuals borrowed an additional £1.4bn, new data from the Bank of England has showed.
The Bank of England’s money and credit statistics have revealed that the annual growth rate for all consumer credit rose from 5.2 per cent in March to 5.7 per cent in April, the highest rate since February 2020.
Credit card borrowing rose by 11.6 per cent – the highest level since November 2005. Meanwhile other forms of consumer credit, such as car dealership finance and personal loans, rose by 3.4 per cent last month.
Following the release of the latest consumer credit data, analysts warned that we could see a spike in unsecured and secured loans in the near future, as consumers seek to consolidate their debts.
Read more: Mortgage approvals and consumer borrowing in decline
“The ongoing cost of living squeeze has seen consumers turn to credit for everyday spending, we are seeing that in credit card use at the moment,” said Michael Davidson, chief revenue officer at Freedom Finance.
“It is likely that we’ll see a spike in personal unsecured and secured loans follow, as consumers look to consolidate debt later in the credit cycle, and we expect to see demand for high-quality unsecured credit increase as a natural consequence.”
Read more: Consumer lending: Mind the gap
Jayadeep Nair, chief product and marketing officer at Equifax UK, said a recession looks increasingly likely and the credit industry has a huge responsibility to lend only to those that can afford to borrow.
“Whichever way you look at it, it’s not an easy time to be making financial decisions,” Nair said.
“Prices are rising, interest rates are rising, and a recession looks increasingly likely at some point this year. At times like this, when businesses and people are having to make tough calls about whether to buy or borrow, the credit industry plays a vital role in providing flexibility and some much needed stability to financial outgoings.
“The credit industry has a huge responsibility, to lend only to those that can afford to borrow, to not turn its back on those sub-prime borrowers that would otherwise be tempted to turn to unregulated or illegitimate sources of capital, and to care for existing customers.”
Meanwhile, net mortgage borrowing dropped from £6.4bn in March to £4.1bn in April and mortgage approvals for house purchases, an indicator of future borrowing, also fell from 69,500 to 66,000 over the same period.
Both figures are slightly below their 12-month pre-pandemic averages up to February 2020.
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