A noticeable levelling off of credit card lending over the second half of 2019 so far bucks a significant long-term trend, suggesting that we may see big changes in the credit market during 2020, according to the December 2019 Money Statistics, produced by The Money Charity.
In 2019, after years of considerable, rapid growth, credit card lending across the UK levelled off. According to the Bank of England, in the year to October 2019, outstanding credit card balances grew by only 0.18% (£130 million, or an average of £2.48 per adult), with consecutive monthly falls recorded during July, August and September 2019. This compares to previous years’ rises of 3.9% for the year to October 2018, 5.0% for the year to October 2017 and 5.5% for the year to October 2016.
While credit card balances reached this plateau, total unsecured consumer debt increased by 3.24% (£7 billion) in the last year, while mortgage debt increased by 2.82% (£39.5 billion). The increase in mortgage debt was roughly the same as the Government’s entire fiscal deficit in 2018-19 (£41 billion).
This changing balance between credit card debt and other forms of unsecured credit, such as personal loans and overdrafts, may reflect the growing influence of the FCA’s new rules on persistent credit card debt, which will reach a first anticipated ‘crunch’ point in implementation during Q1 of 2020.
Under these new rules, lenders have a responsibility to proactively help manage the debt of consumers with persistent credit card debt, measured over a three-year period, so that they begin to lessen these persistent debt levels. Early 2020 will mark 36 months from the rules’ implementation, meaning the industry will shortly be addressing the first group of persistent credit card debtors under these new rules.
Erik Porter, Acting Chief Executive of The Money Charity says:
“After years of credit card balances climbing ever higher, this plateauing immediately stands out as highly unusual, and with the first real effects of the new rules on the horizon, the link seems clear. Moreover, a number of the advice charities we liaise and speak with are already seeing and reporting an upsurge in enquiries on credit card debt.
“Credit cards were not designed to be a financial product consumers would use for long-term debt. They were short-term ‘quick fixes’ to help users with temporary fluctuations in income/expenditure, hence their typically high interest rates. The considerable growth in their prevalence for heavy levels of unsustainable indebtedness was always a looming major issue. We therefore welcome the new rules and the intent to draw people out of debt towards financial wellbeing, but remain concerned that too many will simply choose to shift their debt elsewhere, potentially to products with even more unsustainable rates.”
Other striking numbers from the December Money Statistics:
- The number of people unemployed in the UK fell by 123 per day in the year to October 2019. (P20.)
- 1,283 people a day reported they had become redundant in August to October 2019. (P20.)
- Citizens Advice Bureaux in England and Wales dealt with 2,608 debt issues every day in the year to November 2019. (P7.)
Get the full picture and many more fascinating facts about money in the UK in our monthly Money Statistics.
Notes to Editors
- The Money Charity is the UK’s leading financial capability charity. We believe that being on top of your money means you are more in control of your life, your finances and your debts, reducing stress and hardship, and that being on top of your money increases your wellbeing, helps you achieve your goals and live a happier more positive life as a result. Our vision is for everyone to be on top of their money as a part of everyday life. We empower people across the UK to build the skills, knowledge, attitudes and behaviours, to make the most of their money throughout their lives. Find out more at https://themoneycharity.org.uk/
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