Jump in consumer credit borrowing

This was an increase of  £200m when compared to the £600m borrowed in September but was below the previous six-month average of £1.3bn. Broken down, the £800m figure was split between £400m spent on credit cards and £400m through other forms of credit, such as car dealership finance and personal loans.  

Responding to this, Freedom Finance chief executive Emma Steeley said: “This looks to be a combination both of households feeling the pinch from the October energy price cap and a sharp increase in effective rates on personal loans and credit cards.  

“As we enter the Christmas period, all eyes will be on how consumers are managing their finances during the festive celebrations. It will become increasingly important that consumers with expensive debt look to consolidate to cheaper options as they reach the end of shortening interest-free periods or face higher interest repayments on credit card debt built up over the year.  

“Given the rising cost of borrowing, it is vital that everybody accessing the consumer credit sector is exercising best practice. 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.”  

As for the annual growth rate for all consumer credit, this decreased slightly between September and October – dropping from 7.1% to seven percent. Additionally, the annual growth rate of credit card borrowing decreased from 12.1% to 11.5%, while the annual growth rate of other consumer credit remained at 5.1%.  

The effective rate on new personal loans to individuals, meanwhile, increased by 48 basis points to 7.23% in October – the highest level since December 2018 when it hit 7.45%.  

The effective rate on interest bearing credit cards also increased, going from 18.96% in September to 19.31% in October. In contrast, the effective interest rate on interest-charging overdrafts slightly decreased, dropping by ten basis points to 20.73%.