The British Bankers Association (BBA) has released figures that show borrowing on unsecured loans and credit cards has grown at its fastest rate for 10years.  Consumer Credit was up 7% year on year, which is the fastest annual rate of growth since November 2006. As lenders compete to offer the best deals it seems that this is having a knock on effect on consumer spending, with net unsecured borrowing up from 465million in September to 633milion in November.

Borrowing is up due to an increase in overdrafts, credit cards and unsecured loans.  On a seasonally adjusted basis, net borrowing added up to £413m, higher than the previous 6momth average of £286m. Outstanding borrowing on credit cards grew by £220m, just above the 6month average of £211m.

Interest rates on lending are some of the lowest ever seen.  Lenders have launched a price war as they compete for the top spot.  First Direct doubled its maximum unsecured loan amount to £50,000, and credit card companies have launched some of the longest interest free periods ever, some 41 months. October also saw a retail sales boom, and the BBA data suggest that this was due to increased spending on credit.

Chief Economist of the BBA, Rebecca Harding said Consumer credit is now growing at its fastest rate since November 2006, reflecting strong retail sales growth. Consumer confidence remains robust as borrowers take advantage of record low interest rates.”

Managing Director of Credit Cards at Lloyds Bank Group added further that the figures “are proving relatively resilient in the face of continued uncertainty and as we move towards the end of the calendar year, we can expect that the use of credit cards will continue to rise; particularly in relation to Black Friday and Christmas sales, but the impact of recent political and economic changes on borrowing patterns is yet to be seen.”

The BBAs figures (seasonally adjusted) for mortgage lending also show that the number of home loans approvals reached a five month high in October at 40,851. The number of remortgages dropped slightly to 24,622 but the number of other loans secured on property rose to 8,847, the highest since January 2014.

Assistant Economist at Capital Economics Andrew Wishart, said approvals for purchases were now not far off the monthly average of 43,000 as reported by the BBA reported in 2015 he commented “with the short-term effect of the referendum on housing market confidence and activity now seemingly behind us. But with recent strong demand from first-time buyers set to be hampered by higher inflation, and credit standards no looser than last year, we don’t expect approvals to surge”