Credit card lending grows as Bank of England prepares for interest rate hike

Annual growth of consumer borrowing, excluding mortgages, remained stable in June, at 8.8 percent. Credit cards have accounted for an increasing share of consumer credit growth over recent years, the central bank said, and the growth rate of credit card lending has exceeded that of other loans and advances (which includes personal loans, overdrafts and car finance) since January. Annual credit card growth was 9.5 percent in June, while the growth rate of other loans and advances was 8.5 percent.

In June, the annual growth rate for mortgage lending remained unchanged at 3.2 percent and has now been around three percent since late 2016. Although this is above the growth rate between 2009 and 2013, it “remains modest compared to the pre-crisis period”, the bank said.

Households borrowed an extra £3.9bn secured against their homes in June, which slightly exceeds the average of the past year.

Peter Tutton, head of policy at StepChange Debt Charity said that while the growth in consumer credit had stabilised, households are still at risk of being tipped into “severe problem debt”, particularly if interest rates rise.

The figures come as many in the City prepare for the Bank of England to announce an increase in interest rates to 0.75 percent this week.

Tutton said: “We estimated nine million people are already using credit just to make ends meet, as the recent Office for National Statistics report showed the poorest 10 percent of households spent two-and-a-half times their disposable income. Therefore, helping the households living on a financial knife must be a priority for public policy.”

Gillian Guy, chief executive of Citizens Advice, said: "People’s finances are increasingly stretched with many turning to credit to make ends meet. Our figures show 25% of UK households with a volatile income used credit to pay for essentials such as food and bills. In the last year, we helped 125,000 people with consumer credit issues."