Credit card lending picks up again amid warnings over UK household debt

Credit card lending expanded by 9.2 per cent on the same month a year earlier, up from the rate of 8.9 per cent in August and the fastest since April

High street lenders made more than £2.4bn from overdrafts in 2017, with fees sometimes more expensive than payday loans (AP)

The annual rate of credit card lending picked up again in September, the latest data from the Bank of England showed on Monday.

The figures are likely to reinforce regulators' concerns about the pace at which households are adding to unsecured debt to finance their consumption.

Credit card lending expanded by 9.2 per cent on the same month a year earlier, up from the rate of 8.9 per cent in August and the fastest since April.

Overall unsecured credit rose by £1.6bn in September, taking the annual rate to 9.9 per cent, down from 10 per cent in August.

The growth rate is down from the 10.9 per cent peak last November, but the Bank has been warning about the pace of unsecured consumer credit growth, which has largely been driven by new car loans in recent years.

Last month the Bank's Financial Policy Committee required commercial banks to hold more capital against this form of lending, and warned that lenders were underestimating their likely losses on credit cards if the economy took a turn for the worse.

"While consumer credit growth has come modestly off its peak levels, it remains too high for comfort and the Bank of England will likely be disappointed it has been pretty sticky in recent months," said Howard Archer of the EY Item Club.

Gillian Guy, the chief executive of Citizens Advice, said: “The rise and rise of consumer debt is a cause for alarm at a time when large numbers of people are already in financial difficulty."

“The [Financial Conduct Authority] must step in to curb the worrying rise in debt - by banning credit card firms from pushing more credit onto people who haven’t asked for it, and compelling them to offer support sooner when it’s clear people can’t pay."

The Bank's latest data also showed that there were 66,232 new mortgages for house purchases in September, down from the 67,232 in the previous month and below the 66,867 average of the previous six months, reinforcing the picture of a slowing residential property market in the wake of the Brexit vote in 2016.

Despite concerns about the overall economy's momentum, the Bank of England is widely expected to raise interest rates for the first time in a decade on Thursday in order to rein in inflation, which hit 3 per cent in September, a five year high.

A hike would push up the cost of both secured and unsecured borrowing.