Credit card borrowing in the UK experienced its most rapid annual growth in nearly two years this past November, as households sought to manage increased expenses associated with the Christmas season. The Bank of England’s latest report reveals that individuals borrowed an additional £2.1 billion in consumer credit, which marks an increase from October’s £1.7 billion.
Specifically, net borrowing on credit cards reached £1 billion, a rise from £700 million the previous month. Other forms of consumer credit, such as personal loans and dealership financing, saw a £100 million increase, reaching a total of £1.1 billion.
The annual growth rate of credit card borrowing climbed from 10.9% in October to 12.1% in November, the highest level recorded since January 2024. Experts interpret these figures as reflective of households increasingly relying on credit as they navigate mounting living costs.
Simon Trevethick from StepChange, a leading debt charity, noted that for many, this uptick in borrowing may signal the challenge of managing daily expenses without resorting to credit. Furthermore, polls suggest that around 14 million individuals may struggle to afford holiday expenses.
Despite the UK’s annual inflation rate falling to 3.2%, it remains above the government’s target of 2%, and overall prices are considerably higher than in previous years. Consumers have noticed price hikes in festive items, a trend linked to rising food costs.
According to separate data from the British Retail Consortium (BRC), shop price inflation in December increased to 0.7%, up from 0.6% in November, driven primarily by food prices increasing to 3.3%. However, there was relief in non-food sectors, where prices dropped by 0.6% year-on-year due to substantial discounts offered by retailers.
BRC’s chief executive, Helen Dickinson, emphasized that shoppers could still find good value on essential Christmas items, including vegetables, cheeses, and alcohol. She highlighted the widespread promotional activities across popular gifting categories, such as toys and home entertainment.
Interestingly, retail sales volumes experienced an unexpected fall of 0.1% in November, attributed to consumer hesitancy amid discussions of potential tax hikes impacting the Chancellor’s upcoming budget. Nonetheless, recent studies from KPMG indicate that economic uncertainty has made consumers cautious in their spending.
In a possibly optimistic twist, economists suggest that the rise in consumer credit may indicate a renewed confidence among households to borrow funds for essential purchases. However, it is important to note that deposits made by households in banks and building societies increased by £8.1 billion in November, up from £6.7 billion in October, reflecting a cautious approach as they prepare for potential tax changes.
Additionally, the UK housing market appears to be slowing, evidenced by a decrease in net mortgage approvals for house purchases, which fell by 500 to 64,500 in November. Alex Kerr, a UK economist at Capital Economics, explained that while the uptick in deposits may align with anxieties over forthcoming tax increases, it is noteworthy that the rise was significantly less than the £20.2 billion surge seen in October 2024, prior to another autumn budget.
Kerr posited that the latest figures suggest that speculation regarding forthcoming tax increases did not significantly deter consumer spending in November. This could imply that while households remain optimistic about their financial capabilities, there may still be limited opportunities for a surge in consumer spending throughout 2026.