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UK Finance: "Increasing balances on credit cards is a huge problem"

ended 18. June 2024

UK Finance has this morning published data showing outstanding balances on credit card accounts grew by 9.9 per cent over the twelve months to March 2024. Newspage asked brokers if they're seeing more people with credit card debt they can't pay down, and whether it is  impacting people's ability to get a mortgage? Their views are below.

6 responses from the Newspage community

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Andrew Montlake
Managing Director at Coreco
People living with sizeable credit card balances that they can't shift is becoming more and more common. The cost of living crisis, coupled with higher mortgage rates, has impacted people's ability to pay their credit cards in full. This data once again highlights the stress many households are under.
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Justin Moy
Managing Director at EHF Mortgages
Increasing balances on credit cards is a huge problem. It's been made worse by higher interest rates and the cost of living crisis. It's fuelled by the use of credit cards to cover day-to-day household bills and is made worse by the lack of balance-surfing, with more borrowers having to suffer rates in excess of 25% per year rather than the 0% options enjoyed for years. With less appetite from mortgage lenders to consolidate unsecured debt, the spiral of expensive card borrowing is not abating while mortgage rates remain high.
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Dariusz Karpowicz
Director at Albion Financial Advice
Unfortunately, people are feeling the squeeze and the cost of living crisis continues to loom large. It's therefore no surprise that UK Finance has reported a 9.9% increase in outstanding credit card balances over the past year. This rise in debt is starting to impact people's ability to get a mortgage, as higher outstanding balances can negatively affect credit scores and overall affordability assessments. We’re seeing more clients struggling to pay down their credit card debt, which complicates their mortgage applications. Something needs to be done, ideally a rate cut by the Bank of England to provide some relief. In the meantime, borrowers should focus on managing their debt and maintaining a healthy credit profile to improve their chances of securing a mortgage. The situation underscores the importance of financial planning and the need for support mechanisms to help those affected by rising living costs.
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Riz Malik
Independent Financial Adviser at R3 Wealth
Credit card debt is spiralling, and we have noticed it is increasingly impacting borrowers when it comes to affordability calculations. Some want to consolidate it onto their main property to bring down their monthly cost but they need to understand securing unsecured debts does have consequences. Even Bank of England rate cuts are not going to sort out this problem that is going to impact an increasing number of households.
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Aaron Strutt
Product and Communications Director at Trinity Financial
We are speaking to more people with chunky credit card balances. Some of them are trying to consolidate their debt, although they are struggling because of their high debt-to-income ratios.

Many people have no idea that lenders use affordability calculators to determine their borrowing ability. Loan sizes are typically reduced when people have credit cards, loans, cars on finance, and childcare fees
If people have unsecured debt as high as 40% or 50% of their salary, they may struggle to get a mortgage, although lenders have different acceptance criteria.

If you are planning to get a mortgage it is not advisable to take on more debt or sign up for new cars until you understand your borrowing limits.
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Graham Cox
Director at Bridging Hub
Credit card debts are noticeably high with a lot of our mortgage clients. Many look to consolidate their debts when remortgaging. It's a good solution for many, but the danger is consolidating debt can become addictive. And unless you make overpayments, it's often more expensive in the long run, as the interest is paid over the entire mortgage term.