Credit card borrowing “U-turn” as consumers stock up well before Xmas

Commenting on today’s Bank of England Money & Credit data, Emma Steeley (CEO of Freedom Finance, one of the UK’s leading digital lending marketplaces) said: “With consumers stocking up early ahead of Christmas with fears around potential shortages and the impact of industrial action, credit card borrowing U-turned from an almost two-decade high in November to net repayments in December.

“It is great news that despite the cost-of-living crisis and economic uncertainty, people appear to be managing their debt sensibly and reduced total credit card borrowing. Other forms of consumer credit saw a notable increase in December with £1 billion of new borrowing (the highest since October 2019) through the products such as personal loans and car finance.

“The cost of borrowing has risen sharply over the past year with average household quoted rates on credit cards reaching 22.46%, their highest levels since 1998, while personal loans posted their highest quarterly increase of all time in Q4 2022.

“The shift from credit card borrowing to other forms of consumer credit therefore perhaps reflect a change in attitude as consumers start to consolidate some of their more expensive debt into products with typically lower rates such as personal loans. With the era of cheap money looking to be at an end for at least the next few years, consumer demand for alternative borrowing products, such as secured loans, could well see an increase over the coming months.

“It remains incredibly important that everybody accessing the consumer credit sector is exercising best practise when searching for products. Shopping around and taking advantage of the latest technologies means would-be borrowers can find the best rates available to them without fear of being rejected and damaging their credit score.”