Consumers’ borrowing passes £200bn mark

Consumers racked up another £1.5 billion in credit cards and loans, figures showed on Monday, taking total borrowing past £200 billion in a further worrying landmark for the Bank of England.

The Bank’s latest credit data for June showed the total outstanding loans rising to £200.9 billion over the month as fears mount in Threadneedle Street over the increasing debt burden on consumers.

Although the £1.5 billion surge is lower than May’s £1.8 billion rise, the annual growth rate remains above 10%.

That will concern Governor Mark Carney, who has flagged vulnerable consumers as a key risk to the outlook as inflation puts the squeeze on household incomes.

Capital Economics’ Ruth Gregory said: “This will clearly do nothing to allay policymakers’ fears that unsecured credit is growing too quickly.”

Last week Alex Brazier, the Bank’s executive director for financial stability, said it could force banks to hold more capital as an “insurance policy” to protect the wider economy in case the rapid growth in consumer credit turns sour.

But experts added that the hints of a slowing in the growth of consumer loans — the 10% growth is the weakest since April last year — would offer some reassurance to the Bank’s rate-setters. The monetary policy committee is due to announce its latest policy decision and updated economic decisions this week on Super Thursday.

The EY Item Club’s Howard Archer said: “While consumer credit growth remains too strong for the Bank of England’s liking, June’s slowdown further dilutes the case for an interest rate hike on Thursday. June’s dip in inflation and ongoing muted growth in the second quarter had already weakened the case for a near-term rate hike.”

The Financial Conduct Authority said it would analyse credit records and sales practices in car finance to assess the risks to lenders from a potential collapse in car values.