Borrowing at a record high but consumer debt slows

With 2018 in full swing, the Bank of England has noted that the growth in British households borrowing money has fallen to its slowest pace in two years – although outstanding unsecured debts are still at a record high.

Borrowing at a significant high

Unsecured borrowing grew by 9.1% in the year leading up to November 2017, down from 10% in August and also down from a peak in lending growth of 10.9% in November 2016.

Regardless of the slowed-down growth in unsecured loans, net borrowing still came in at around £1.4bn in the month, driving the value of unsecured debt up to a record high of £205.8bn. Credit card usage accounts for some £70bn of this figure.

Why is consumer debt slowing?

Increasing uncertainty regarding future policies around personal finances and the wider economy is leading to greater caution among the general public. According to the Bank of England's credit condition survey, the amount of available unsecured credit was cut by lenders at the highest rate since 2009 in Q3 2017.

However, the continued squeeze on consumers' purchasing power means that borrowing is not going completely out of favour. With earnings failing to outpace inflation, many households are still turning to loans to get by in the short term.

Warnings over taking out loans

Debt charities are warning debtors and lenders alike that the slowdown will not reduce the burden of these kinds of debts.

"While the rate of growth may have slowed, the outstanding amount of debt taken on by households continues to grow at a rapid pace. We know that millions of people are already using credit just to get by, while wages falling behind inflation risks leaving many more families vulnerable," said Peter Tutton, Head of Policy at StepChange Debt Charity.

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