Spending on credit cards increases in the run-up to Christmas as households rely more on borrowing
Britons are turning to their credit cards at a rapid pace almost two years ahead of the Christmas and November Budgets, as signs emerged that households are becoming more cautious elsewhere.
Data from the Bank of England shows that outstanding credit card balances rose to almost £78bn in November, up 12.1 per cent on the same month last year. It marked the fastest annual growth since the start of 2024 and underlined the pressure many families are left under as the cost of living continues to rise.
The jump may have been fueled by festive spending on gifts, food and drink, but economists warned it could also reflect a growing reliance on borrowing to bridge the gap between incomes and rising daily costs.
Martin Beck, a senior economic advisor at WPI Strategy, said that it is still not clear whether this growth points to improving consumer confidence or households using credit to make better use of money. “Using high credit cards may show resilience, but it may also show that many families are struggling without credit,” he said.
Other indicators paint a more mixed picture of consumer health. Office for National Statistics figures showed retail sales fell 0.1 per cent in November and remained around 3 per cent below pre-pandemic levels, suggesting shoppers remain on full alert.
Barclays has estimated that spending on Boxing Day sales has fallen sharply, with shoppers expected to spend £3.6bn, down from £4.6bn last year, as families continue to prioritize essentials over impulse shopping.
Meanwhile, the housing market has shown signs of recovery despite political and financial uncertainty during the preparation of the Budget. The Bank of England said loan approvals eased slightly in November, falling by around 500 to 64,500, indicating that demand remains stable.
That slight drop came as mortgage rates rose slightly to 4.2 percent, from 4.17 percent in October, the first increase since February. However, economists believe this increase will be short-lived after the Central Bank cut interest rates to 3.75% in December, with further reductions expected later this year.
Matt Swannell, chief economic adviser at EY Item Club, said activity in the housing market continues to show the gradual improvement in buying seen over the past two years. “The big gains are behind us, but conditions are still supportive enough to keep transactions going,” he said.
National data showed house prices rose by 0.6 per cent year-on-year in December, although prices fell by 0.4 per cent month-on-month, bringing the average UK home to £271,068.
Looking ahead, economists warn that the outlook for consumer spending remains fragile. Unemployment is expected to rise further in 2026, possibly reaching an 11-year high, which could have a significant impact on confidence and discretionary spending.
Analysts at Pantheon Macroeconomics noted that households increased savings by £12.3bn in November, the biggest monthly rise in more than a year. However, they suggested that this was likely to be driven by arrivals ahead of the expected tax hike rather than a broader pullback in spending.
As Rachel Reeves announced £26bn in tax rises in November, which mainly affect people through frozen borders, businesses face a delicate balance in 2026: consumers are still spending money, but more cautiously – and often with credit.
