Credit card interest hit highest since records began, figures showed today.
Housing market has been hit by soaring rates post mini-budget as savers rush to lock in higher interest rates.
This comes as annual growth in consumer credit is now at its highest in more than three years.
Laura Suter, head of personal finance at AJ Bell, comments on the latest Bank of England Money and Credit figures: “Soaring mortgage rates inevitably scared many people off moving house or getting onto the property ladder for the first time. With mortgage interest rates climbing above 6% post mini-budget, moving house became unaffordable for many people. Approvals for house purchases, which is an indicator of the future health of the housing market, dropped in September. But October’s figures will prove far worse, as only the final week of September was impacted by the budget fallout.
“The cost-of-living crisis is still pushing more people to borrow, although credit card use dipped slightly in September. The annual growth rate in consumer credit rose again in September and is at the highest rate since early 2019. The cost of credit is also rising, with credit card interest at its highest rate since records began in 2012 – standing at 18.96% in September. The reality is that these official debt figures won’t capture the full picture, as lots of people will be using debt that’s not captured – such as Buy Now Pay Later, informal loans from family and friends and last-resort options like loan sharks.
“Rising interest rates spurred savers into action, with a big leap in the amount saved in cash accounts in the month. Savers put £8.1bn extra into their savings accounts in September – the highest amount saved since June 2021. Lots of people rushed to lock in high interest rates in fixed-rate accounts, with £3.4bn put into them in the month. Another £3bn was put into easy-access cash accounts, which have seen rates rise considerably. Anyone with spare money at the moment will be trying to stash it away to help cushion themselves against rising bills later this winter, with a rise in interest rates adding an extra incentive.”