Author Lauren Howells

The annual growth rate of consumer credit has slowed to 9.1% in November, says the Bank of England, its lowest rate since December 2015, down from a peak of 10.9% in November 2016.

Net unsecured consumer borrowing was at £1.4 billion in November, down from £1.91 billion in November 2016.

Bank of England had previously warned that UK lenders were “underestimating potential losses” on unsecured borrowing

Back in September last year, the Independent reported that the Bank of England had warned that UK lenders were “underestimating their potential losses” regarding unsecured loans to customers.

Appears that lenders have been “reining in” the amount of unsecured credit available to consumers

Commenting on the slowdown in consumer borrowing growth in November, Howard Archer, chief economic advisor to the EY ITEM Club, said that it did appear that lenders had been “reining in” the amount of unsecured credit available to consumers and were “tightening their lending standards”.

“Indeed, the last Bank of England’s credit condition survey indicated that lenders cut the amount of unsecured credit available in the third quarter of 2017 at the fastest rate since 2009, with a further significant reduction seen in the fourth quarter. Meanwhile, bank’s credit scoring criteria for granting both credit card and other unsecured loans were reported to have tightened in the third quarter,” Archer said. 

“Heightened uncertainties over the outlook” could be encouraging consumers to be more cautious

Bank of England announces consumer credit growth has slowed

“It may well be that heightened uncertainties over the outlook and increased concerns over personal finances are encouraging some consumers to be more cautious in their borrowing. However, the persistent squeeze on consumer purchasing power is likely continuing to fuel the need for some consumers to borrow,” Archer added.

Archer said that the Bank of England would be “pleased” with the further slowdown in consumer credit in November and would “be looking for a continuation of this trend”.

Growth may have slowed – but outstanding amount of borrowing “continues to grow at a rapid pace” 

Others were more cautious in their response to the Bank of England’s announcement.  

Peter Tutton, Head of Policy at StepChange Debt Charity, commented: “While the rate of growth may have slowed, the outstanding amount of borrowing taken on by households continues to grow at a rapid pace.

“We know that millions of people are already using credit just to get by; while wages falling behind inflation risks leaving many more families vulnerable to debt. Helping the millions of households living on a financial knife edge must be a priority for public policy.

“With the pile of outstanding credit card debt still growing, the Financial Conduct Authority (FCA) must ensure that its credit affordability rules are robust enough to ensure that what is designed to be a short-term lending product, does not trap people in long-term, expensive and potentially harmful cycles of debt.”