Cost of living: Britons are borrowing more and saving less as the crisis begins to hurt | Economic news

Credit card borrowing last month rose at the fastest annual rate since 2005, according to new figures from the Bank of England.

At the same time, the amount of money deposited in the accounts plummeted, as concerns grew over the rapidly rising cost of living.

Consumer credit, which includes credit card borrowings, overdrafts, personal loans and auto financing, rose 6.5% year on year in June.

In this framework, the annual growth rate of credit card borrowing was 12.5% ​​– the highest rate since the 12.6% increase in November 2005.

The net inflow of money into both deposits at banks and building societies as well as NS&I accounts in June was £1.9bn, about a third of the amount deposited in May.

Laura Suter, head of personal finance at AJ Bell, said the numbers are “just the tip of the iceberg”.

She said: “Once the energy price cap rises again in October and we all use more energy in the winter, these numbers will continue to rise.

“Also, while some people may still have savings to fall back on now, as they are depleted, more people will have to turn to debt.

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“The UK savings boom is also waning, and the amount saved has fallen to its lowest level in more than five years, as people have nothing more to put away once they have paid the bills. invoices.”

Paul Heywood, director of data and analytics at credit reporting firm Equifax, said higher-income households were dipping into savings, while lower-income households were turning to the credit sector. .

“Lenders will need to find ways to respond to this demand responsibly and comprehensively, and should, where possible, use data to combat the urge to retreat into the core market segment.”

Karim Haji, Head of UK Financial Services at KPMG, said: “The UK’s major banks reported no major deterioration in credit quality this week, but they are aware of the need to support the most vulnerable customers. vulnerable throughout what will be an extremely difficult second half. the year.

“Meanwhile, reports from other sectors of the economy, such as supermarkets, indicate that people are moderating their spending as much as they can to cope with rising costs.”

It comes as the government reveals details of the latest cost of living support measures, with a £400 cut on energy bills for most households, and further support for those deemed vulnerable, such as pensioners and people with disabilities.

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