UK Credit Card Borrowing Rises at Fastest Annual Rate in Almost Two Years: What It Says About Household Finances
Key Takeaways:
- Households are leaning more heavily on credit — Credit card borrowing rose at the fastest annual rate in almost two years, suggesting many households are using debt to manage rising living and seasonal costs.
- Falling inflation has not eased financial pressure — Despite inflation slowing, prices remain high and food costs continue to rise, pushing more consumers to rely on high-interest borrowing.
- Borrowing and caution are rising together — The increase in credit card use alongside higher household savings points to financial uncertainty rather than renewed consumer confidence.
Bank of England figures show a sharp rise in consumer credit as households lean on borrowing to manage rising costs and Christmas spending.
UK households borrowed on credit cards at the fastest annual rate in almost two years in November, according to new figures from the Bank of England, highlighting the continued strain on household finances despite easing inflation.
The data, released in the wake of Chancellor Rachel Reeves’s highly anticipated autumn budget, shows individuals took on an additional £2.1bn in consumer credit during the month, up from £1.7bn in October. Of this, £1bn came from credit card borrowing alone, marking a notable jump from the £700m recorded the previous month.
Annual growth in credit card borrowing rose from 10.9% to 12.1%, the highest rate since January 2024. While economists caution against drawing sweeping conclusions from a single month’s data, the figures offer a revealing snapshot of how households are navigating a still-challenging cost-of-living environment.
Borrowing through Christmas pressure
November is traditionally a peak month for consumer borrowing, as households prepare for Christmas spending. However, experts suggest the latest rise reflects more than seasonal patterns.
Simon Trevethick of the debt charity StepChange said the figures point to growing reliance on credit to meet everyday expenses, not just festive indulgence.
“For many households, the increase in consumer credit borrowing in November may reflect the reality that everyday costs are becoming harder to manage without turning to credit,” he said.
StepChange’s own polling found that around 14 million people expected to struggle to afford Christmas, suggesting that borrowing is increasingly being used as a coping mechanism rather than discretionary spending.
Inflation easing, but prices still high
While headline inflation has eased significantly from its peak, financial pressure remains widespread. The UK’s annual inflation rate fell back to 3.2%, but this remains above the Bank of England’s 2% target, and prices are still materially higher than they were before the cost-of-living crisis began.
Food costs in particular continue to weigh heavily on household budgets. Figures from the British Retail Consortium (BRC) show that shop price inflation edged up to 0.7% in December, driven largely by a rise in food price inflation to 3.3%, compared with 3% in November.
Although retailers offered discounts on non-food items and festive promotions helped limit price increases on some essentials, many households still faced higher grocery bills compared with last year.
Credit cards versus other borrowing
The Bank of England’s data highlights an important distinction within consumer credit trends.
Credit card borrowing rose sharply, increasing by £1bn in November.
Other forms of consumer credit, such as personal loans and car finance, increased more modestly, rising by £100m to £1.1bn.
This divergence suggests households may be turning to credit cards as a flexible, short-term solution, rather than committing to longer-term borrowing arrangements.
Credit cards are often the first line of borrowing when cash flow tightens, but they also carry some of the highest interest rates, particularly if balances are not cleared quickly.
Confidence or financial fragility?
Economists are divided on whether the rise in borrowing signals improving consumer confidence or deeper financial fragility.
On one hand, increased borrowing could indicate that households feel sufficiently secure in their income prospects to take on debt. On the other, it may simply reflect necessity rather than optimism.
Official figures show retail sales volumes unexpectedly fell by 0.1% in November, suggesting consumers remained cautious overall. Research by KPMG also found that concerns about the broader economy continued to weigh on spending decisions toward the end of 2025.
This mixed picture complicates the narrative. Households are borrowing more, but they are not necessarily spending more freely.
Savings rise alongside borrowing
One of the more striking features of the Bank of England data is that increased borrowing coincided with a rise in savings.
Households added an additional £8.1bn to bank and building society deposits in November, up from £6.7bn in October. This suggests that while some households are relying on credit, others are choosing to hold on to cash.
Alex Kerr, UK economist at Capital Economics, said this pattern could reflect households reorganising their finances ahead of anticipated tax changes announced in the autumn budget.
“That suggests nervousness about forthcoming tax rises didn’t put consumers off borrowing in November,” Kerr said.
“But overall, there isn’t much scope for a pickup in consumer spending in 2026.”
The rise in deposits, while notable, was still far smaller than the £20.2bn surge seen in October 2024, ahead of the previous autumn budget. This suggests caution rather than panic.
Housing market slowdown continues
The data also offers insight into the housing market, which showed signs of cooling in the run-up to the budget.
Net mortgage approvals for house purchases fell by 500 to 64,500 in November, reflecting ongoing affordability pressures, higher borrowing costs, and uncertainty about future tax and housing policy.
The slowdown in housing transactions may be indirectly linked to rising consumer credit use. With large purchases such as homes on hold, some households may be turning to unsecured borrowing to manage short-term expenses instead.
The risk of rising household debt
While a single month’s increase in borrowing is not necessarily alarming, sustained growth in credit card debt raises longer-term concerns.
Credit cards typically carry interest rates well above those on mortgages or personal loans. For households already struggling with living costs, rolling balances forward can quickly lead to unmanageable debt.
Debt charities warn that rising credit card use often precedes an increase in problem debt, particularly if wage growth fails to keep pace with inflation or if economic conditions deteriorate.
The risk is that short-term borrowing to cover essentials becomes a long-term financial burden.
What this means for households in 2026
Looking ahead, the Bank of England’s data suggests a cautious outlook for consumer spending in 2026.
While inflation is falling and wage growth has improved, households remain sensitive to price changes, interest rates, and fiscal policy. The combination of rising credit card borrowing and higher savings indicates uncertainty rather than confidence.
For many households, the challenge will be managing existing debt in an environment where interest rates are expected to remain relatively high for longer than previously anticipated.
Legal and financial implications
From a legal and advisory perspective, rising consumer credit has broader implications:
Increased risk of arrears and defaults, particularly on high-interest credit products
Greater demand for debt advice and restructuring, including repayment plans and formal insolvency solutions
Potential knock-on effects for housing, employment stability, and family finances
At Parachute Law, we regularly see how financial pressure translates into legal issues, from housing disputes to insolvency and contractual difficulties. Early advice and realistic budgeting remain critical tools for households navigating these pressures.
Conclusion: A warning sign, not a crisis – yet
The rise in UK credit card borrowing at the fastest annual rate in almost two years is not, on its own, evidence of a household debt crisis. However, it is a clear warning sign.
Despite easing inflation, many households remain financially stretched, using credit to bridge the gap between income and rising costs. With limited scope for a consumer-led economic rebound in 2026, according to economists, sustained reliance on high-cost borrowing could pose real risks.
Whether this trend stabilises or worsens will depend on wage growth, interest rate decisions, and the broader economic outlook. For now, the November figures serve as a reminder that for many households, the cost-of-living crisis may be easing – but it is far from over.
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