Britons resorted to their credit cards at the fastest rate in almost two years in the run-up to Christmas and the November budget, although there were signs that households elsewhere were becoming more cautious.
Data from the Bank of England shows that outstanding credit card balances rose to almost £78 billion in November, up 12.1 percent on the same month last year. It was the largest annual increase since the start of 2024 and underscored the pressures many households continue to face as the cost of living remains high.
The rise is likely to have been fueled by festive spending on gifts, food and drink, but economists warned it could also reflect a growing reliance on credit to bridge the income gap and rising everyday costs.
Martin Beck, chief economic adviser at consultancy WPI Strategy, said it was still unclear whether the rise reflected improved consumer confidence or simply households using credit to smooth spending. “Higher credit card usage could indicate resilience, but could also indicate that many families are struggling to make ends meet without borrowing,” he said.
Other indicators painted a more mixed picture of consumer health. Figures from the Office for National Statistics showed retail sales fell 0.1 per cent in November and remained around 3 per cent below pre-pandemic levels, suggesting shoppers remain cautious overall.
Barclays estimates that spending on Boxing Day sales has fallen sharply. Consumers are expected to spend £3.6 billion, down from £4.6 billion last year, as households continue to prioritize essentials over discreet purchases.
Meanwhile, the property market showed signs of resilience despite the political and fiscal uncertainty ahead of the Budget. The Bank of England said the number of mortgage approvals fell only slightly in November, falling by about 500 to 64,500, suggesting demand remained broadly stable.
That slight decline came as average mortgage rates rose slightly to 4.2 percent from 4.17 percent in October, the first increase since February. However, economists believe this rise will be short-lived after the bank cut interest rates to 3.75 percent in December and further cuts are expected later this year.
Matt Swannell, chief economic adviser at EY Item Club, said property market activity continued to reflect the gradual improvement in affordability over the past two years. “The big gains are behind us, but conditions remain favorable enough to keep transactions moving,” he said.
National data showed house prices rose 0.6 per cent year-on-year in December, although prices fell 0.4 per cent month-on-month, taking the average house value in the UK to £271,068.
Looking ahead, economists warn that the outlook for consumer spending remains fragile. Unemployment is expected to rise further in 2026, potentially reaching an 11-year high, which could weigh heavily on confidence and discretionary spending.
Analysts at Pantheon Macroeconomics noted that households increased their savings by £12.3 billion in November, the biggest monthly increase in over a year. But they suggested this was more a result of people getting ahead of expected tax rises, rather than a broad-based decline in spending.
After Rachel Reeves announced £26 billion in tax rises in November, which mostly hit individuals through frozen thresholds, businesses in 2026 face a delicate balance: consumers are still spending money, but increasingly cautiously – and often on credit.
