UK consumer borrowing grows at fastest pace since 1993, Bank of England says

Overview

Updated Yesterday

British households borrowed £2.46 billion in unsecured credit during August, the largest monthly total since the Bank of England began tracking the figure in 1993. Credit card balances grew 13.3 percent from a year earlier, while personal loans and car finance rose 7.9 percent.

The £2.46 billion figure beat the £1.9 billion economists forecast by roughly 30 percent. It arrives as mortgage approvals fall to their fewest since December 2023 and as the government prepares tax rises in finance minister John Healey's October 28 budget.

Why it matters

Whether Britain's borrowing surge is confidence or distress decides if a rate hike brings growth or a wave of defaults.

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Key Indicators

$3.26B

Net unsecured consumer lending, August 2026

£2.464 billion; largest monthly rise since records began in 1993, about 30% above the £1.9B forecast.

9.6%

Annual growth in consumer credit, August

Up from 9.3% in July; credit card growth accelerated to 13.3%.

54,918

Mortgage approvals for house purchase, August

Fewest since December 2023 and below the 56,100 median forecast.

21.55%

Interest rate on credit card balances, August

Up from 21.45% in July; rates above 20% become costly when balances persist.

Voices

Curated perspectives — historical figures and your fellow readers.

Ever wondered what historical figures would say about today's headlines?

People Involved

Katie Clinton

Head of financial services advisory, KPMG UK

Offered both interpretations of the borrowing surge

John Healey

UK finance minister

To present first annual budget on October 28, 2026

Matt Swannell

Chief economic adviser, ITEM Club

Read the data as evidence of households cushioning spending power

Rob Wood

Chief UK economist, Pantheon Macroeconomics

Says borrowing helps households bridge higher energy bills

Organizations Involved

Bank of England

Central bank

Released record borrowing figures; markets price a November rate hike

The UK's central bank, publisher of monthly Money and Credit statistics.

GfK

Market research firm

Consumer confidence index hit a two-year high in September 2026

Runs the UK's long-running consumer confidence survey.

Timeline

August 2026 October 2026

3 events Latest: 2 days ago

October 2026
Finance minister presents first budget
Upcoming Upcoming

John Healey expected to announce tax rises; borrowing data raises the stakes.
October 28th, 2026
September 2026
Bank of England releases record borrowing figures
Latest Data release

BoE reports £2.464 billion net consumer lending in August, the most since records began in 1993; mortgage approvals hit 54,918, fewest since December 2023.
2 days ago
August 2026
Record month of household borrowing
Economic data

Net unsecured lending reaches £2.46 billion; credit card debt rises £1.2 billion.
August 1st, 2026

Scenarios

Bank of England raises rates in November as borrowing boom persists

Likely Resolves by Dec 15, 2026

Discussed by: Reuters; investor pricing cited in coverage of the BoE data

Markets already price a rate increase at the November Monetary Policy Committee meeting as the first since the Iran war outbreak, with another move in February. Strong consumer credit data gives hawks a reason to act: if borrowing reflects resilient demand, rates are not biting. A hike would raise the cost of credit card debt, already carrying rates above 20 percent, and of new personal loans.

Borrowing holds up as confidence-driven spending continues

Uncertain Resolves by Dec 1, 2026

Discussed by: KPMG UK's Katie Clinton; GfK's two-year-high confidence reading

If credit-fueled spending reflects stronger household confidence and better income expectations, retail sales keep growing and the economy absorbs higher rates. GfK's survey, which hit a two-year high in September, supports this view, as does the official figure showing shoppers unexpectedly increased spending in August. Official retail sales data over the following months would confirm the pattern.

Household defaults rise, lenders tighten credit

Possible Resolves by Mar 1, 2027

Discussed by: Pantheon Macroeconomics' Rob Wood; ITEM Club's Matt Swannell; Newsquawk analysis

If households are borrowing because energy bills outpace incomes, the credit boom is a strain signal. Rising defaults would push lenders to tighten underwriting, hitting consumption and slowing the economy. The Bank of England's quarterly credit conditions survey and Financial Conduct Authority data would show a measurable uptick in consumer credit arrears or defaults.

Historical Context

2 moments from history that rhyme with this story — and how they unfolded.

2004–2007

UK debt boom before the 2008 financial crisis (2004–2007)

British households borrowed heavily through the mid-2000s as house prices climbed, with consumer credit and mortgage debt growing in tandem. The Bank of England warned repeatedly about the pace of household indebtedness.

Then

When asset prices fell in 2007–2008, the credit boom unwound as defaults rose and lenders withdrew. Britain entered a deep recession with household debt near record highs.

Now

The episode produced tighter mortgage lending rules and a decade of slow credit growth, though household borrowing resumed rising sharply in the 2020s.

Why this matters now

Today's combination of record consumer credit and weakening mortgage approvals echoes the late stages of that cycle, though the current drivers — energy prices and inflation — differ from a housing bubble.

2016–2018

UK credit card lending spike and regulatory response (2016–2018)

Unsecured consumer credit grew about 10 percent annually in 2017, prompting the Bank of England's Financial Policy Committee to flag it as a risk to financial stability. The Financial Conduct Authority subsequently introduced rules to cap persistent credit card debt.

Then

Lenders tightened underwriting on new credit, and the FCA's persistent-debt rules pushed firms to help customers pay down balances.

Now

Regulatory intervention, rather than interest rate changes, was the main brake on unsecured lending. It established a template for how the BoE responds to rapid consumer credit growth.

Why this matters now

At 9.6 percent annual growth, today's borrowing pace is close to the level that triggered a regulatory response a decade ago. The Bank of England could again move through underwriting standards rather than rates.