According to figures from the Bank of England, consumer lending increased by the most in nearly five years last month, thanks to a record increase in credit card borrowing, which analysts believe could be an indication of the growing cost-of-living constraint.

Consumer credit increased by a net 1.876 billion pounds ($2.46 billion) in February, according to data released by the Bank of England on Tuesday. This was around 1 billion pounds higher than forecast in a Reuters poll of experts and the largest increase since March 2017.

Martin Beck, an economist at the EY ITEM Club consultancy, believes the surge was fueled by a boost in consumer confidence as the Omicron variant’s spread slowed.

“But another possibility is that more consumers had to resort to credit in the face of growing cost of living pressures,” he said.

Inflation reached a 30-year high of 6.2 per cent in February, and the government’s budget watchdog predicted this week that it will rise to over 9% by late 2022, contributing to the largest drop in living standards since the 1950s.

Paul Dales, Capital Economics’ chief UK economist, said that when people’s finances are tight, they tend to limit their desire for credit, thus he expects consumer lending to drop.

The amount of net loans in January was lowered down from 608 million pounds to 143 million pounds.

The majority of the increase came from credit card lending, which reached 1.5 billion pounds in February, the highest level since monthly records began in 1993.

Mortgage approvals and the value of secured credit were also lower than expected, indicating that the housing market may have lost some of its recent ferocity.

Last month, lenders authorised 70,993 mortgages, down from 73,841 in January.

(Adapted from FinancialPost.com)

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