The data released by the Bank of England shows that credit card lending annual rate has spiked up again during the month of September. Regulators are likely to be concerned regarding the pace by which British households add to the unsecured debt so that their consumption gets financed. Lending through credit cards increased by about 9.2 percent in September 2017 when compared to the same month in 2016. In August, the rate was about 8.9 percent. This increase is the quickest from April.
Excess consumer credit
Howard Archer of EY Item Club said that while the consumer credit has rocked off the peak levels, it continues to be too high to be comfortable. He also said that the Bank of England will likely be disappointed. The last few months, he reminded, are enough proof of such an occurrence.
Despite the many concerns regarding the overall momentum of the economy, it is expected that the interest rates will be upped by the Bank of England. If this is done, it will be the first time in 10 years.
The overall unsecured credit went up by £1.6 billion during September. This number took the yearly rate to about 9.9 percent. This is a decrease from the 10 percent recorded in August. The rate of growth is down from the peak of 10.9 percent from November 2016. The bank, however, has given a few warnings when it came to the pace of growth in terms of unsecured credit growth. The latter was primarily driven by the new car loans during the last few years.
The Financial Policy Committee of the Bank asked commercial banks in September to hold excess capital against such kinds of lending. It warned that lenders are probably underestimating when it comes to calculating probable losses on the issuance of credit cards. This may become serious if the UK economy changes for worse.
Gillian Guy of Citizens Advice said that the ever-increasing rise of consumer debt makes a good reason for sounding the alarm. This is occurring at a time when big swathes of the UK population are already mired in a financial mess. The chief executive of the organization said that the Financial Conduct Authority should step in to limit debt's rise. He said that this could be done by prohibiting credit card companies to push more credit towards people who have not demanded it. Credit card companies should not offer money if the people taking the loan cannot pay it back.