Credit card debt rose in June at its fastest annual pace in 17 years, as struggling households appeared to rely on additional borrowing to cope with the rising cost of living.
Credit card lending rose by £740m a month, up 13% on the previous year, according to Bank of England figures which showed the biggest year-on-year rise since October 2005.
Analysts said inflation rose to 10.1% in July and the threat of escalating energy price rises over the winter showed the situation could worsen.
On Friday, the energy regulator, Ofgem, said the average annual household electricity and gas bill would rise to £3,549 a year from October, up 80% since April.
Debt charities said the rise in unsecured loans showed households were under “relentless pressure” to meet monthly food and energy payments and called on the government to increase benefits for those most affected.
Paul Heywood, director of data and analytics at credit rating agency Equifax UK, said: “The most vulnerable have been left without quick fixes, which is why we continue to see considerable growth in demand for credit.”
Broader consumer credit, which also includes unsecured and overdraft personal loans, rose at the fastest annual rate since March 2019, by 6.9%, to £1.42 billion.
Households deposited an extra £4.3bn with banks and building societies in July, compared with £2.6bn in June, indicating wealthier households have started to build a significant savings bank as to defend against the deterioration of the economic situation.
The Bank of England said borrowing across all forms of consumer credit was lower than in May, when it rose to £1.8bn, but remained above the 12-month average before the pandemic until February 2020, of £1 billion.
Joanna Elson, chief executive of the charity Money Advice Trust, which runs National Debtline and Business Debtline, said targeted help should be a feature of any rescue package.
“Today’s figures are yet another sign of the relentless pressure that family finances are under,” he said.
“Friday’s confirmation of the big rise in energy prices will only have added to the worries of millions of people worried about how they will make ends meet in the coming months.
“For many households, however, the options are already running out, with more recourse to credit to cover essential needs. And for those already struggling, the situation will only get worse without intervention.”
Figures covering buy-to-let mortgage approvals showed the residential property market had leveled off after falling from last year’s peak when the stamp duty holiday of homes worth less than £500,000 sent monthly approvals in excess of six figures.
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The Bank of England said mortgage approvals rose to 63,770 from a downwardly revised June reading of 63,184, beating economists’ forecasts in a Reuters poll for a fall to 61,725.
Martin Beck, chief economic adviser at EY Item Club, said pressure on home buyers meant a dramatic slowdown in property price growth was increasingly likely.
“Intensifying pressure on household incomes, deteriorating growth prospects and the prospect of a higher interest rate peak have increased the risk of a hard landing scenario,” he said. to say.