AJ Bell press comment – 30 September 2022
- Credit card borrowing year-to-date is £5.9bn…
- …equivalent to the total for the previous five and a half years combined
- Mortgage lending remains above pre-pandemic levels
- NS&I popularity rises in August after rates increase
Laura Suter, head of personal finance at AJ Bell, comments:
“Credit card borrowing remains at a 17-year high as more people turn to plastic to cover rising costs. The nation added another £700m to their credit card debt in August, taking total outstanding borrowing on credit cards to £5.9bn in the year to date. This is more than double the pre-pandemic total for the same period and is equal to the total net credit card borrowing for the previous five and a half years combined*.
“Once personal loans and car finance are added into the total figure, the nation is sitting on an extra £10.5bn of borrowing this year. But this figure hides the true scale of the nation’s debts as it doesn’t include Buy Now Pay Later borrowing and more informal loans between family and friends. One saving grace is that despite the backdrop of a rapidly rising Base Rate, debt isn’t actually getting much more expensive yet. Rates on personal loans actually fell in August and are still in line with pre-pandemic levels, while credit card interest is only marginally above the pre-pandemic rate.
“Some people still found spare cash to put away in a savings account, with £4.3bn put into savings or NS&I accounts in August. Unsurprisingly, this is below the pre-pandemic level but still remains healthy considering the backdrop of rising prices and squeezed household budgets. These savers are also benefiting from higher interest rates, where they are switching.
“The popularity of NS&I accounts leapt in August after the Government-backed organisation raised interest rates at the end of July across a number of its accounts. It meant the amount people saved in NS&I accounts rose from £300m in July to £1.1bn in August. Since then we’ve seen an increase in the rate paid on Green Savings Bonds and another boost to Premium Bond prizes, meaning deposits will likely climb further next month.
“The housing market is buoyant, despite concerns that rising interest rates would prevent some buyers from committing. Mortgage lending rose again in August to £6.1bn and is almost 50% higher than the pre-pandemic average. These figures capture lending before the latest mini-Budget, and the subsequent predictions that interest rates will rise faster and higher than previously expected – so it will be interesting to see what next month brings. Average mortgage rates rose to 2.55% in August – a rate that most homebuyers would bite your hand off for today, such is the speed that the market is moving at.”
*Net repayments of credit card debt during the pandemic offset borrowing
