British families are piling on debt at the fastest rate for nearly 12 years – pushing the amount owed on credit cards to a record high.
Bank of England figures yesterday showed households borrowed more than £1.9billion in November through credit cards, loans or overdrafts – or nearly £45,000 a minute.
The figures excluded mortgage borrowing and represented the biggest debt binge since March 2005 as shoppers splashed out on Black Friday deals ahead of Christmas.
Black Friday – an import from the United States that sees stores slash prices for 24 hours to tempt shoppers to spend before Christmas – fell on November 25 this year
It was followed by so-called Cyber Monday on November 28 when retailers slashed prices online to encourage internet shopping – resulting in a long-weekend of heavy discounting for consumers.
But analysts said the Bank’s report suggested millions of families spent money they did not have as they snapped up presents, food and drink for the festive season on credit.
Campaigners warned that borrowers now faced being buried under debts they could not pay off.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: ‘Households increasingly turned to debt towards the end of last year in order to spend more. Such rapid growth in unsecured credit is unsustainable.’
The Bank said borrowing in November was 10.8 per cent higher than a year earlier – the biggest annual increase since October 2005.
A total of £192.2billion was owed on credit cards, loans and overdrafts by the end of November – or around £7,400 per household.
That was the heaviest debt burden since December 2008, three months after the collapse of American banking giant Lehman Brothers plunged the global economy into crisis.
Borrowing on credit cards rose by £558million in November to a new record of £66.7billion.
Other lending – such as personal loans, overdrafts and car finance but excluding mortgages – rose by £1.4billion to £125.5billion.
The latest debt binge came just three months after the Bank cut interest rates to a new low of 0.25 per cent in the aftermath of the Brexit vote.
While the rate cut hammered savers, who have lost out since the financial crisis, it is feared it has encouraged borrowers to take on debts that cannot afford.
‘Consumers seem to be borrowing to take advantage of very low interest rates,’ said Howard Archer, chief UK and European economist at IHS Markit.
Peter Tutton, head of policy at the StepChange debt charity, said: ‘Alarm bells should be ringing. Previous experience shows how such increases in the levels of borrowing can leave households over-indebted and vulnerable to sudden changes in circumstances and drops in income that can pitch them into hardship.
‘Lenders, regulators and the Government need to ensure that the mistakes made in the lead-up to the financial crisis are not repeated and that there are better policies in place to protect those who fall into financial difficulty.’
The Money Advice Trust estimates that 5.5million Britons will ‘fall behind on their finances’ this month having splashed out over Christmas.
It also warns that ‘perilously few’ families have a plan to repay the debts they owe.
Joanna Elson, chief executive of the Money Advice Trust, said: ‘Consumer credit continues to soar and this is something we should all be concerned about. If the economy does indeed suffer in the years ahead, these extra debts could become even more difficult to repay.
‘The figures are even more stark when you consider that they only take into account some of households’ pre-Christmas spending. Our research shows that one in three Britons put Christmas on credit – and we are already seeing a surge in people contacting National Debtline for advice as a result.’
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