Getting Out of Debt

30 June 2022

Credit card borrowing increased by £0.7bn last month

• Individuals borrowed an additional £1.4 billion in consumer credit in April, on net, following £1.3 billion of borrowing in March (Chart 2).
• This is the third consecutive month where borrowing has been higher than the 12-month pre-pandemic average up to February 2020 of £1.0 billion.

Source: Bank of England

Consumer credit flows

Consumer borrowing is increasing again post-Covid

Total amounts

• £60.9bn – Consumer credit card debt (approx. £1,180 per adult)
• £141bn – other loans and advances
• £1584.8bn – mortgage debt
• £1,786.6bn – total lending to individuals (approx. £34,700 per adult)

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• Average earnings - £31,980 (mean), £24,900 (median) (ONS, May/June 2022)

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Source: Bank of England

Consumer credit growth rates

By next April, more middle income families are expected to struggle too

Effective interest rates beginning to increase

Average effective interest rates

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• Overdrafts: 20%
• New personal loans: 6.5%
• Credit cards: 18%

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(Bank of England, May 2022)

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Source: The Money Charity / Bank of England

Unemployment is projected to increase as interest rates rise

Unemployment projection based on market interest rate expectations, other policy measures as announced

Source: Bank of England

Some 23.4 million people (34% of the population) were living below the Minimum Income Standard this April

People on lower incomes are more exposed to rising inflation

• MIS (AHC), single adult ~ £225 p/w

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• MIS (AHC) couple + 2 kids ~ £507 p/w

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By October 2022, 75% of households are expected to be worse off than in April last year

• More generous social security
• Improving energy efficiency of homes to reduce energy bills
• Responding to supply-side drivers of inflation (notably fossil fuel reliance) rather than squeezing demand
• Macroeconomic policy to support jobs and the green transition

Policy response needed