British shoppers are using the credit cards more than ever before, stoking fears that households are racking up unsustainable levels of debt.
Consumers borrowed £16.4bn on the plastic in April, Bank of England figures show, a record high.
After taking into account repayments, that added an extra £606m to households total credit card debts, which now amount to £130.3bn.
Fierce competition in the market has led banks to offer increasingly generous terms to new credit card customers, with ever-longer interest-free periods.
£mCredit card borrowing is at record levelsSource: Bank of EnglandGross credit card lending seasonally adjusted20042006200820102012201420168k10k12k14k16k18kHighcharts.comTuesday, Mar 31, 2015● Gross credit card lending seasonally adjusted: 14 275
Officials at the Bank of England have warned that they are worried about consumer debt rising to dangerous levels, and banks have indicated that they intend to tighten their lending standards.
However there is little sign of that happening so far as the latest figures indicate a sustained splurge by households.
The borrowing spree comes at a time when rising prices are squeezing households’ living standards and economists expect this to lead to a slowdown in GDP growth.
“Given recent public concerns from policymakers, a continuation of rapid growth in credit will no doubt be under scrutiny by the Bank of England’s Financial Policy Committee,” said Martin Beck, senior economic adviser to the EY Item Club.
“But in the short-term at least, that households are able and willing to continue borrowing to fund consumption should at least help to mitigate headwinds from rising inflation and subdued pay rises and present some upside risk to forecasts of a sharp consumer slowdown.”
Meanwhile the mortgage market showed signs of weakness in April.
The number of mortgage approvals for home purchases fell from 66,043 in March to 64,645 in April, the lowest level since September 2016.
Mortgage approvals for home purchaseThe mortgage market is not growingSource: Bank of EnglandMortgage approvals for home purchase seasonally adjusted2004200620082010201220142016025k50k75k100k125k150kHighcharts.com
The number of remortgages also fell, with approvals down from 42,250 to 40,575.
Hansen Lu at Capital Economics said that weak economic growth and the start of the reduction of mortgage interest tax relief for landlords have both dented demand.
“In addition, and perhaps more importantly, high house prices are both discouraging some potential buyers and pricing others out of the market entirely,” said Mr Lu.
“That helps to explain why buyer enquiries struggled to recover after falling sharply in response to the Brexit vote and stamp-duty surcharge last year.”
However, he believes “there is room for optimism” as there are hints of the economy bouncing back.
“The unemployment rate remains very low, and mortgage rates look very attractive compared to past norms,” he said.
“As a result, we expect mortgage approvals to stabilise in the months ahead and end 2017 up slightly compared to the start of the year.”