Britons turned to their credit cards at the fastest pace in almost two years in the run-up to Christmas and November’s Budget, even as signs emerged that households were becoming more cautious elsewhere.

Data from the Bank of England shows that outstanding credit card balances rose to nearly £78bn in November, up 12.1 per cent on the same month last year. It marked the sharpest annual increase since early 2024 and underlined the pressure many households remain under as the cost of living continues to bite.

The jump is likely to have been fuelled by festive spending on gifts, food and drink, but economists warned it may also reflect a growing reliance on borrowing to bridge the gap between incomes and rising everyday costs.

Martin Beck, chief economic adviser at consultancy WPI Strategy, said it was still unclear whether the increase pointed to improving consumer confidence or simply households using credit to smooth spending. “Higher credit card use could indicate resilience, but it may also signal 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 slipped by 0.1 per cent in November and remained around 3 per cent below pre-pandemic levels, suggesting shoppers remain cautious overall.

Barclays has estimated that spending on Boxing Day sales fell sharply, with consumers expected to spend £3.6bn, down from £4.6bn a year earlier, as households continued to prioritise essentials over discretionary purchases.

Meanwhile, the housing market showed signs of resilience despite political and fiscal uncertainty in the run-up to the Budget. The Bank of England said mortgage approvals dipped only marginally in November, falling by around 500 to 64,500, indicating that demand remained broadly stable.

That small decline came as average mortgage rates ticked up slightly to 4.2 per cent, from 4.17 per cent in October, the first increase since February. However, economists believe this rise will be short-lived after the Bank cut base rates to 3.75 per cent in December, with further reductions expected later this year.

Matt Swannell, chief economic adviser at EY Item Club, said activity in the housing market continued to reflect the gradual improvement in affordability seen over the past two years. “The major gains are behind us, but conditions remain supportive enough to keep transactions moving,” he said.

Nationwide data showed house prices rose by 0.6 per cent year on year in December, although prices dipped by 0.4 per cent on a monthly basis, bringing the average UK home value 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 savings by £12.3bn in November, the largest monthly rise in over a year. However, they suggested this was more likely driven by people getting ahead of anticipated tax rises rather than a broad-based pullback in spending.

With Rachel Reeves having announced £26bn in tax rises in November, largely affecting individuals through frozen thresholds, businesses face a delicate balance in 2026: consumers are still spending, but increasingly with caution — and often on credit.

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Credit card spending surges ahead of Christmas as households lean on borrowing