UK consumer credit growth in June accelerated at the fastest rate in three years, as households struggle to cope with the rising cost of living.
People borrowed an additional £1.8bn in consumer credit last month, up from a £900m increase in May, according to the latest Bank of England data.
With inflation at a 40-year high of 9.4%, experts said many households were using all forms of credit available to them to pay soaring food and utility bills.
Households loaded an extra £1bn on their credit cards, with another £800m on car dealership finance, personal loans and other consumer credit.
The annual growth rate for all consumer credit increased to 6.5% in June, the highest rate since May 2019, while credit card borrowing surged 12.5%, the highest rates since November 2005.
Martin Beck, chief economic adviser to the EY Item Club, said the rise in credit card balances was concerning, indicating that borrowers were increasingly unable to clear their debts at the end of the month.
“What’s more, the squeeze on household finances is likely to intensify, particularly if the latest pickup in energy futures prices is sustained and inflation rises even further.”
Jane Tully, director of external affairs and partnerships at the Money Advice Trust, the charity that runs National Debtline and Business Debtline, said the figures were “a warning sign that for some the pressure is already beginning to tell”.
She added: “Whilst many households are so far able to absorb the impact of rising prices, others are facing impossible choices trying to meet everyday costs. And with a further hike in energy prices around the corner, our concern is that more people will have to turn to credit to cover basic needs.”
Paul Heywood, chief data and analytics
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