BoE Money and Credit Monthly Statistics: Commentary

“In October, consumers continued to borrow more than they paid off, accruing extra debt ahead of an expected increase in interest rates next month. This could be a sign of growing consumer confidence and solid post-pandemic recovery, but also suggests that people are keen to take advantage of ultra-low interest rates while they can. October’s net borrowing of mortgage debt by individuals is the first sign of a potential retrench, as it reached its lowest since July 2021.

“If the Bank of England does choose to increase interest rates next month, we can expect to see demand for credit fall fairly sharply as consumers weigh up the rising cost of borrowing, and some find that they cannot afford to open a new credit line. Lenders are going to be watching out next month on how the Bank’s decision goes, and will also need to keep a close eye on the customers that might be in vulnerable financial situations, to ensure that rising rates don’t translate into a spike in arrears and loan defaults. Open Banking is helping lenders spot the signs of financial difficulty with more accuracy, and it’s a good idea for borrowers to check their credit score to see if there’s room for improvement; it’s quite possible that qualifying for a more attractive rate could help to mitigate the impact of a rising base rate.”

Paul Heywood, Chief Data & Analytics Officer at Equifax UK