• Credit card borrowing surprisingly fell in December, to £400m
• Savings dropped to £2.7bn – lower than pre-pandemic levels
• The nation has £58.7bn of debt on credit cards
Laura Suter, head of personal finance at AJ Bell, comments on the latest Money and Credit data from the Bank of England:
“The impact of Omicron on Christmas and New Year social plans, plus a nation that did its Christmas shopping early last year, means that the amount we all borrowed on credit cards and personal loans actually fell in December last year when compared to November.
“However, comparisons with the previous year show just how much more Brits are borrowing. In November and December combined in 2020 the nation repaid £2.3bn of debt, while last year in those two months they added £1.8bn to the debt pile. Clearly the lockdown restrictions in 2020 had a big part to play in those figures, but so too does the cost of living crunch we’re all feeling.
“The amount we owe as a nation on credit cards has been steadily climbing since February last year, when some of the good lockdown habits we all developed of paying down debt, spending less and saving more started to unwind. The rise in living costs coupled with the squeeze on some people’s income and savings mean that many have had to resort to borrowing again just to pay the bills. Now the nation owes £58.7bn on credit cards, which is still significantly lower than the £72bn of debt we were carrying into the pandemic. However, it’s going to keep rising as we head into April, when energy bills climb again, taxes increase and inflation continues its march upwards.
“Even though Omicron squashed many people’s plans and reduced the amount of debt they took on, it doesn’t appear to have bolstered savings accounts. The amount we’re all saving has also dwindled when compared to last year, with £2.7bn saved in December 2021, around 10% of the £20.9bn that was saved in December a year earlier. The final three months of 2020 saw us all squirrel away £55bn, but last year that figure has dropped to just a quarter of that, at £13bn.
“Lacklustre interest rates aren’t providing much incentive for people to stash their cash away, and it may be that more people are choosing to invest it rather than leave it in cash. But the reality for many families is that there isn’t anything left at the end of the month for them to save.”
