Britons turned to their bank cards on the quickest tempo in nearly two years within the run-up to Christmas and November’s Funds, at the same time as indicators emerged that households have been changing into extra cautious elsewhere.
Knowledge from the Financial institution of England exhibits that excellent bank card balances rose to just about £78bn in November, up 12.1 per cent on the identical month final 12 months. It marked the sharpest annual improve since early 2024 and underlined the strain many households stay below as the price of dwelling continues to chunk.
The soar is prone to have been fuelled by festive spending on items, foods and drinks, however economists warned it might additionally replicate a rising reliance on borrowing to bridge the hole between incomes and rising on a regular basis prices.
Martin Beck, chief financial adviser at consultancy WPI Technique, mentioned it was nonetheless unclear whether or not the rise pointed to enhancing shopper confidence or just households utilizing credit score to easy spending. “Larger bank card use may point out resilience, however it might additionally sign that many households are struggling to make ends meet with out borrowing,” he mentioned.
Different indicators painted a extra blended image of shopper well being. Figures from the Workplace for Nationwide Statistics confirmed retail gross sales slipped by 0.1 per cent in November and remained round 3 per cent beneath pre-pandemic ranges, suggesting buyers stay cautious general.
Barclays has estimated that spending on Boxing Day gross sales fell sharply, with shoppers anticipated to spend £3.6bn, down from £4.6bn a 12 months earlier, as households continued to prioritise necessities over discretionary purchases.
In the meantime, the housing market confirmed indicators of resilience regardless of political and monetary uncertainty within the run-up to the Funds. The Financial institution of England mentioned mortgage approvals dipped solely marginally in November, falling by round 500 to 64,500, indicating that demand remained broadly steady.
That small decline got here as common mortgage charges ticked up barely to 4.2 per cent, from 4.17 per cent in October, the primary improve since February. Nonetheless, economists imagine this rise will likely be short-lived after the Financial institution minimize base charges to three.75 per cent in December, with additional reductions anticipated later this 12 months.
Matt Swannell, chief financial adviser at EY Merchandise Membership, mentioned exercise within the housing market continued to replicate the gradual enchancment in affordability seen over the previous two years. “The main good points are behind us, however situations stay supportive sufficient to maintain transactions transferring,” he mentioned.
Nationwide knowledge confirmed home costs rose by 0.6 per cent 12 months on 12 months in December, though costs dipped by 0.4 per cent on a month-to-month foundation, bringing the typical UK residence worth to £271,068.
Wanting forward, economists warn that the outlook for shopper spending stays fragile. Unemployment is predicted to rise additional in 2026, doubtlessly reaching an 11-year excessive, which may weigh closely on confidence and discretionary spending.
Analysts at Pantheon Macroeconomics famous that households elevated financial savings by £12.3bn in November, the biggest month-to-month rise in over a 12 months. Nonetheless, they prompt this was extra probably pushed by individuals getting forward of anticipated tax rises moderately than a broad-based pullback in spending.
With Rachel Reeves having introduced £26bn in tax rises in November, largely affecting people by means of frozen thresholds, companies face a fragile steadiness in 2026: shoppers are nonetheless spending, however more and more with warning — and sometimes on credit score.
