Credit cards

Households save less and borrow more by credit card

Households are spending more on credit cards and investing less money in a context of squeezing the cost of living.

The Bank of England said net consumer borrowing was £1.2bn in November 2021. This figure includes credit card borrowing, overdrafts and personal loans.

The majority of this was due to additional credit card borrowing, accounting for £862m of the total. This is the largest net credit card borrowing since July 2020.

People also deposited a further £4.7bn into bank and building society and NS&I accounts in November.



It’s a stark contrast (until November 2020)

Laura Suter, AJ Bell

This was less than half of the £11.2bn average net flow entering the accounts in the 12 months to October 2021.

Laura Suter, personal finance manager at AJ Bell, said Black Friday discounts and concerns about late deliveries and stock-outs helped spending rise in November 2021.

She said: ‘It’s a stark contrast to November last year (November 2020) when Britons actually paid off £915m of credit card debt rather than adding to borrowing . It even looks high compared to the pre-pandemic December peak of £681million spent on plastic in December 2019.

“The good saving habits that many people have taken during lockdown also showed signs of dwindling in November.”

Ms Suter said the “meager returns” on savings may be part of why the enthusiasm for savings is “draining a bit”.

Soaring energy costs are putting pressure on households, with bills for other common purchases also rising.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The household savings rate returned to pre-pandemic levels in November, although the decline appears to reflect their bid to keep consumption going. real as inflation soars, rather than a rapidly strengthening recovery. .”

Mr Tombs said the spring inflation outlook ‘suggests that households will need to save significantly less this year just to maintain their current level of spending, given the outlook for falling real disposable income’.

He said: “A consumer boom driven by rapidly shrinking pandemic-related savings continues to look highly unlikely.”



The timing couldn’t have been worse

Sarah Coles, Hargreaves Lansdown

Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, said: “The price of everything from energy bills to filling up the car or the supermarket trolley has soared. We also flashed more plastic in November as we shopped early for Christmas – lest shortages of everything from toys to turkeys spoil the festivities.

“A major component of consumer borrowing is auto financing, and the exorbitant cost of new and used cars means we’re taking out bigger loans. By November, the cost of used cars had risen 27.1% year-on-year, so it’s no surprise we had to borrow more to cover the cost.

“The timing could not have been worse, as lending and overdraft rates began to climb towards the end of the year, as inflation concerns led to speculation that the Bank of England was about to raise rates.The rise from 0.1% to 0.25% was finally postponed until December, but was factored into the cost of borrowing long before.

The number of mortgage approvals granted to homebuyers also fell in November to its lowest level since June 2020.

Some 66,964 mortgages were approved in November 2021, according to the Bank’s Money and Credit report.

Although it was the lowest monthly total since June 2020, the figure was still close to the average of 66,700 in the 12 months to February 2020.

A stamp duty holiday had previously prompted a rush of homebuyer activity. Stamp duty applies in England and Northern Ireland, and the holiday ended completely from October 2021.

The Bank also said the standard rate on newly taken mortgages fell to a new low of 1.50%, while the standard rate on outstanding mortgages also fell to a new low of 2, 02%.