Borrowing on plastic may have driven spend spree

CREDIT card balances and other forms of unsecured lending climbed to a seven-month high in September, according to Bank of England data released yesterday.

Unsecured lending rose by a bigger-than-expected £600m in the month -- its highest since February.

Credit card lending accounted for one third of the increase in unsecured lending, which coincided with a surprisingly strong rebound in retail sales in September, and suggests Britons may have racked up much of those purchases on their cards. The squeeze on incomes may have pushed shoppers towards more borrowing.

Yet the Bank’s “M4 lending” figure, a measure of overall bank lending, fell by 2.5 per cent on the same time last year, which is a steep decline from August’s 0.8 per cent annual drop.

Headline M4 broad money supply fell by 0.4 per cent on the month for a 1.7 per cent annual decline – the steepest yearly fall since January 2011.