5th January 2016
The level of cash being borrowed by consumers in the run up to Christmas surged to its highest level in eight years, new figures have revealed.
Statistics from the Bank of England show that net unsecured consumer credit climbed to £1.5bn in November from £1.2bn in October, taking borrowing to its highest level since February 2008.
Notably November was also the ninth month running that unsecured consumer credit had been over £1bn.
Howard Archer, chief UK and European economist at IHS Global Insight noted that the marked rise in lending during November ties in with robust retail sales during the month with the Office for National Statistics reporting that volumes were up 1.7% month-on-month and 50% year-on-year.
He said: “This will fuel concern that consumers are borrowing more and saving less to finance their spending, which is likely a consequence of relatively high consumer confidence and extended low interest rates.
“This is something that the Bank of England needs to keep a close eye on, and it does appear that some Monetary Policy Committee members are becoming more worried.”
Archer warned that borrowers need to allow for the fact that interest rates are likely to start to rise during 2016.
He added: “We think it is still very possible that the Bank of England will start to lift interest rates in the first half of 2016, with a rise from 0.5% to 0.75% in May being our favoured option.
“Even so, we only see interest rates reaching 1% by the end of 2016, 1.75% by the end of 2017 and 2.25% by the end of 2018.”