• £800m added to credit card lending
• £6bn of savings put away in cash
• Cash interest rates rise, for those willing to switch
• Mortgage borrowing hits £7bn – still above pre-pandemic levels
Laura Suter, head of personal finance at AJ Bell, comments on the latest borrowing and savings data from the Bank of England:
“Brits put another £800m of money on their credit cards in March, taking total credit card borrowing in the first three months of this year to £2bn. This is a significant leap from the fact that rather than borrowing more, in the same three months last year a total of £2.7bn of money was repaid on credit cards. The figures show how much the cost of living crisis is really hitting households, with many already forced to put essential bills on their credit cards.
“Total borrowing, including personal loans and car finance, was slightly below February’s figures, with £1.3bn of debt taken out in total. One bright spot for those taking on debt is that the average interest rates on credit cards, personal loans and overdrafts all fell, despite the Bank of England hiking interest rates in recent months. In reality we’re seeing a split market, where those with good credit scores are able to access low rate or 0% deals, while those with blots on their record are forced to take on more expensive debt.
“Despite the rising cost of living, some people are finding excess cash to save each month, with £6bn saved during March in bank accounts and with NS&I. This is still above pre-pandemic levels and shows that some people are wisely stashing away some cash to help with the rising cost of living further down the line.
“The recent Base Rate hikes by the Bank of England mean that savers are being slightly better rewarded for their efforts too, with interest rates on fixed rate deals ticking up. But savers need to switch in order to benefit from higher rates, as banks won’t just willingly pass it on to money sitting in old accounts.
“Despite rumours of a slowdown beginning, the housing market is still buoyant, with another increase in mortgage lending in March. The forward-looking figures also show no signs of the market juddering to a halt, with approvals for house purchases remaining at similar levels to February and still above pre-pandemic levels.
“The number of people choosing to remortgage rose again. Rates have already risen, so anyone getting a new mortgage now has missed the cheapest deals. But with expectations that the Bank of England will hike rates again people are trying to lock in deals now before the rates ratchet up. Anyone whose fixed-rate mortgage expires in the next six months should start looking around for deals now, as you can often lock in an offer and a rate for six months. And one thing is for sure, rates will have risen again in six months time.”