Credit card

Rise in UK consumer lending, driven by record credit card borrowing

Shoppers walk on Oxford Street as rules on wearing face coverings in certain settings in England are relaxed, amid the spread of the coronavirus disease (COVID-19) pandemic, in London, Britain , January 27, 2022. REUTERS / Toby Melville

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LONDON, March 29 (Reuters) – Consumer lending in Britain rose last month in nearly five years, thanks to a record increase in credit card borrowing, according to data that analysts said could be a sign of the rising cost of living up-press.

Bank of England figures showed on Tuesday that consumer credit rose by 1.876 billion pounds ($2.46 billion) in February, around 1 billion pounds more than expected in a Reuters poll of economists and the largest increase since March 2017.

Martin Beck, an economist at consultancy EY ITEM Club, said the increase may have been driven by renewed consumer optimism as the spread of the Omicron variant eased.

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“But another possibility is that more consumers have had to resort to credit in the face of rising cost-of-living pressures,” he said.

Inflation hit a 30-year high of 6.2% in February and the government’s budget watchdog predicted this week that the rate will climb to nearly 9% by the end of 2022, contributing to the biggest drop in the level life since at least the 1950s.

Paul Dales, chief UK economist at Capital Economics, said households typically reduce demand for credit during times when finances are tight and he expects consumer lending to slow.

Net lending for January was revised down to £143m from the previously reported £608m.

Credit card loans accounted for most of the increase, in February to £1.5bn – the biggest increase since monthly records began in 1993.

BoE data also showed mortgage approvals and the value of secured loans were weaker than expected, a tentative sign that the housing market may have lost some of its recent heat.

Lenders approved 70,993 mortgages last month, down from 73,841 in January. ($1 = 0.7641 pounds)

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Reporting by Andy Bruce and William Schomberg; Editing by Bernadette Baum

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