The latest Household Finance update from UK finance, shows:
• Credit card lending reaches 20-year high – with £10.7bn of new debt in September
• Mortgage activity slows amid interest rate rise and Brexit uncertainty
• Savers stuff easy-access accounts – but are losing out to inflation
Laura Suter, personal finance analyst at investment platform AJ Bell, comments:
“Brits’ credit card debt hit a 20-year high in September, with £10.7bn of new lending in that month alone. The figure is the highest since the data began in September 1997 and takes the total amount owed on credit cards to its third highest level during that time – a whopping £44.3bn.
“Brits are at the mercy of soaring interest rates on their debt, with interest rates having already risen this summer and the Bank of England expected to hike them further next year. The average credit card interest rate is now almost 18.5% - meaning Brits are shelling out more than £8bn in interest on this debt.
“There are also fears that the figure will hike again in the final few months of the year, as people put more debt on plastic to pay for Christmas. In 2017 the lead up to the end of the year saw credit card debt soar by another £700m.
“After a rush of re-mortgaging activity in August when the Base Rate rose, fewer people switched last month. There are also signs that the hike in interest rates and nervousness around house prices due to Brexit have put people off buying, with the number of new mortgages falling to a seven-month low. The number of new loans is 10% lower than the same month last year, while re-mortgaging fell by more than 7% in the past year.
“One bright spot is the amount savers have in cash savings accounts is at its highest point in more than seven years, totalling £1.5bn. Savers have shifted more money into easy-access cash deposits and out of notice accounts, in anticipation of further interest rate rises. However, with the average easy-access account paying a far lower rate than current inflation, savers need to be aware they are losing money in real terms.”