New figures from the Bank of England reveal that UK households are borrowing more and saving less than at any point since the start of the pandemic.
Research on spending habits in November 2021 shows that net consumer credit borrowing reached £1.2 billion. Borrowing on credit cards made up more than 70% of the total, reaching £862 million, the highest net borrowing on credit cards since July 2020.
In fact, this amount of credit card borrowing is even higher than the pre-pandemic peak from December 2019, which totalled £681 million.
Additionally, over the 12 months leading up to October 2021, British households deposited an average of £11.2 billion into savings accounts each month. Less than half that figure was saved in November, with savers managing to add a total of £4.7 billion to their savings.
Seasonal financial pressure and a rising cost of living may be responsible
Laura Suter, head of personal finance at AJ Bell, believes that the increase in borrowing is partially due to several seasonal financial factors.
Black Friday sales, stock shortages, and delivery delays caused many Brits to plan for Christmas early, which led to an increase in spending, and borrowing on credit cards.
She also compares November 2021 to November 2020 and expresses concern over the “stark contrast” between the two. Net borrowing in November 2020 saw UK households pay back £915 million worth of credit card debt compared to the £1.2 billion borrowed in 2021.
Suter is worried that the good savings habits that many people got into during lockdown are beginning to dwindle, with “measly” interest rates reducing enthusiasm around saving.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, also has concerns about changes in saving and spending habits. She believes that it’s rising costs that mean many people have been unable to maintain their level of savings in recent months.
She raised her concerns about increasing energy prices and inflation, saying that the price of “filling up your car or supermarket trolley has soared”.
Coles believes that the interest rates of loans and overdrafts, which started to rise in November due to an expected base rate rise, are also to blame for savers’ struggles. Though the base rate rise didn’t come until December, it was still factored into the cost of borrowing beforehand.