According to the latest Money and Credit report from the Bank of England (BoE), borrowing on consumer credit by individuals in April was broadly unchanged when compared to March, at £1.6 billion. This figure was split between £0.7 billion of borrowing on credit cards and £0.9 billion of borrowing through other forms of consumer credit including car dealership finance and personal loans.

The annual growth rate for consumer credit stayed constant in April at 7.7% while that of credit card borrowing fell slightly from 12.8% in March to 12.7% in April.

This comes as households continue to struggle with the cost-of-living crisis and sticky inflation. This is particularly true of food inflation, which currently stands at 17.2%, according to Kantar.

In March, Nationwide Building Society found that nearly 40% said they had to use credit cards in the past six months to pay for supermarket food shopping.

Be wise with credit

Alice Haine, personal finance analyst at DIY investment platform Bestinvest, said: “Rising interest rates, stubbornly high inflation and falling real wages are never a great mix for households trying to successfully navigate their finances through a cost-of-living crisis.

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“It makes turning to credit a likely option for some households. No surprise then that borrowing rose by £1.6bn in April. Lenders are already reporting a rise in defaults on household borrowing such as mortgages and loans, and the increase in credit card debt shows that some are resorting to high-risk borrowing to make ends meet.”

She warned that borrowers needed to use credit cards wisely or switch to a 0% balance card.

She said: “While credit cards typically come with very high interest rates, if they are used wisely, they can help those with niggling debt get their situation under control. A 0% balance transfer card can be a great tool to consolidate multiple debts into one place with no interest applied for a set timeframe – sometimes up to two-and-a-half years – giving the borrower breathing space to clear the liability without the stress that comes with high interest charges.”

Mortgage debt plummets

The report continued that net borrowing of mortgage debt continued to fall from net zero in March to £1.4bn of net repayments in April. The BoE said that this was the lowest level since July 2021 at £1.8bn of net repayments and if the period since the onset of the pandemic was excluded net borrowing of mortgage debt is the lowest level on record. The report started in 1993.

Laura Suter, head of personal finance at AJ Bell said: “Rising mortgage interest rates have put the jitters up homeowners, with net mortgage borrowing falling in April, by £1.4bn – marking the lowest level of net mortgage borrowing bar during the pandemic.

“What’s more, we saw approvals for house purchases fall, which is often used as an indicator of the future health of the housing market. This is before last week’s inflation figures sparked more panic in bond markets, pushing up mortgage interest rates.

“For many homeowners it’s just not an option to borrow more money and move to the next house on the ladder with interest rates where they are. And others are too nervous about the direction of rates and the housing market to make that next house move – so staying put seems the safest option.”

Myron Jobson, senior personal finance analyst, interactive investor, noted that spiking interest rates had spooked borrowers.

He said: “These figures point to further signs that we have become more cautious in response to the rising cost of borrowing as part of an ongoing battle to combat stubbornly high inflation.

“Excluding the period since the onset of the Covid-19 pandemic, mortgage borrowing has plunged to the lowest level since records began as high mortgage rates, in tandem with high house prices and a higher cost of living, has made ownership uneconomical for many would-be buyers.”

Mortgage approvals falling

Meanwhile, the number of mortgage approvals continued to fall with purchase approvals coming to 48,700 in April, down from 51,500 in March. Remortgage approvals increased slightly month-on-month from 32,200 to 32,500.

Steve Seal, CEO, Bluestone Mortgages, said that today’s drop in mortgage approvals along with inflation running at higher-than-expected levels suggested “recovery is further away than anticipated”.

“As inflationary pressures persist, affordability challenges will remain prevalent for borrowers and prospective buyers alike,” he noted.

Seal said that for those struggling to keep up with mortgage repayments and those looking to get on the ladder need to know that “help is always at hand”.

Related: Why NS&I may need to trim interest rates for millions of savers