Credit card numbers continue to soar, debtors defy ‘slowdown fears’

Figures published by the Bank of England show an accelerated increase in consumer debts, rising by £1.6bn in March and exceeding economists’ forecasts. Even though inflation rates are rising and retail sales are slowing down, it's clear that consumers are still borrowing via credit cards and personal loans. 

Consumer debts accelerating

Economists had previously forecasted a slowdown to £1.2bn in consumer debts. However, the Bank of England highlighted an increase of £1.6bn in March, a markedly higher figure than the £1.5bn increase in February.

The increase is 10.2% up on March 2016 and up overall on the average 10% growth rate noted since May 2016. 

Households currently hold a total consumer debt of £197.4bn, £67.7bn of which is due to credit card loans. This sustained increase in borrowing could pull in greater attention from financial regulators, according to The Telegraph. 

“This will certainly not go unnoticed at the Bank of England, from a financial stability perspective at least,” said economist George Buckley at Nomura. “Generally easier credit conditions, including lower personal borrowing rates and extensions of interest-free periods on credit cards, are generating some concern among members of the Financial Policy Committee.” 

Why are borrowing habits on the rise? 

While the UK economy appears to be performing well, consumer borrowing habits could be attributed to a number of factors. Rising taxes on landlords mean mortgage demands have slipped, but this may also have led to an increase in other smaller, personal loans to cope with the knock-on effects. 

Additionally, interest rates on home loans have risen to an average of 2.12% (up 0.02%). Again, this figure stands to recover as the economy outperforms forecast and employment rates increase. Meanwhile, SMEs are increasing their borrowing from banks, taking out an additional £398m in March. 

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