BoE Money and Credit Figures: Commentary

“With inflation running at a 30-year high, the Bank of England is all but certain to raise interest rates on Thursday to an expected 1%. In principle, this is designed to increase the price of borrowing, reduce consumer demand, and take some heat out of spiralling prices, but, for consumers and businesses already in some form of debt, especially those on variable rates, it’s going to be hard not to see this as yet another ballooning bill on the balance sheet.

“These macroeconomic factors mean people are borrowing more and paying down less debt, with one or two exceptions. However the forces driving credit demand are rarely this straightforward, and it’s important that we look beneath the bonnet to determine whether rising demand is driven by consumer confidence, financial hardship, or even anticipation of further price or interest rate rises.

“Our data at Equifax suggests that financial hardship is the elephant in the room, with many more people in the UK entering a state of financial vulnerability and the number of people falling behind on bills also rising. These trends are set to become more pronounced in May and June as the energy price cap rise, council tax rises, and the hike in national insurance flow through to people’s wallets, so this looks more like the end of the beginning for the cost of living crisis than the beginning of the end.”

Paul Heywood, Chief Data & Analytics Officer at Equifax UK