The cost-of-living crisis has seen reliance on credit cards increase as people grapple with soaring food and energy bills. Households piled an additional £1.2billion onto credit cards as living costs increased and Christmas approached - marking the highest amount since 2004.
In total, people borrowed an additional £1.5bn in consumer credit in November, jumping from £748million in October, according to Bank of England figures. As the figures were released, charity StepChange warned of a "real danger" that people will increasingly turn to credit to finance the essentials.
The additional consumer credit borrowing in November was split between £1.19bn on credit cards - the highest total since £1.28 billion was borrowed in March 2004 - and £317 million borrowed through other forms of credit such as car dealership finance and personal loans. Karim Haji, a financial services head at KPMG said: "While this time last year we were breathing a sigh of relief that the worst of the pandemic was behind us, that optimism now seems a dim and distant memory.
"We enter 2023 cautiously with a subdued economy expected to last well into the year. The increase in the cost of living has driven consumer lending up in November with an additional £1.2bn of credit card borrowing.
"Whilst this year's Christmas discretionary spending will have been sacrificed, inflation on essentials and the increased cost of energy means debt is still being accumulated for food, lighting and staying warm." Rising bills will continue to affect finances of households in the coming months.
Richard Lane, director of external affairs at StepChange Debt Charity, said: "The impact of the cost-of-living crisis on people's finances shows little sign of abating. Although government support is continuing to have a positive effect on the proportion of new StepChange clients with energy arrears, energy debt remains high.
"Cost pressures from elsewhere are still driving people into problem debt. Today's Bank of England figures showing increased borrowing even before the traditional festive spending period is also worrying, particularly in light of our pre-Christmas research which found that one in 12 UK adults (8%) would be using credit to pay for Christmas.
"With financial pressures across the board creating problems for an increasing number of households, there is a real danger that people will increasingly be turning to credit to meet essential spending into the new year and beyond." The number of mortgage approvals made to home buyers fell in November to the lowest level since June 2020, according to the Bank's Money and Credit report.
Some 46,100 mortgage approvals for house purchases were recorded in November, down from 57,900 in October. Approvals for re-mortgaging, which only capture re-mortgaging with a different lender, fell to 32,500 in November, from 51,300 in October, and were below the previous six-month average of 48,100.
The figures also show how some types of borrowing have become more expensive as interest rates climb higher. The "effective" interest rate - the actual interest rate paid - on new mortgages increased to 3.35% in November.
The rate on the outstanding stock of mortgages also increased, to 2.38%. The effective interest rate on new personal loans increased to 7.87% in November, the highest level since December 2017 (7.96%).
But the effective rate on interest-bearing credit cards dropped slightly, to 19.24% in November, from 19.31% in October. Gareth Lewis, commercial director of property lender MT Finance, said: "These figures clearly show the squeeze consumers are facing.
"(House) purchase approvals are down, showing that many people stopped and took stock in November as rates continued rising, wondering how high they were going to go and whether they could afford the purchase they were considering. Those who aren't forced into a move may well be wondering whether they should put that purchase on hold for now and wait until the outlook becomes clearer.
"The increase in credit card debt reinforces this as the cost of living has increased alongside interest rates." Households also deposited £5.4 billion net into bank and building society and National Savings and Investments (NS&I) accounts in November, a decrease from £6.3 billion in October and below the average monthly net flow of £5.6 billion during the previous six months.
UK non-financial businesses borrowed £1.9 billion net of bank and building society loans in November (including overdrafts), compared with £7.8 billion of net repayments in October. UK non-financial businesses also withdrew, on net, £3.7 billion of deposits from banks and building societies in all currencies, compared with a net withdrawal of £14.9 billion in October.
