Cash-Strapped Households Take On Debt at Fastest Pace in Over Three Decades

By the Editorial Team · Wednesday, September 30, 2026

Households in the UK increased consumer borrowing by £2.46 billion last month, the largest monthly rise since 1993, as many rely on credit to manage rising living costs. This surge in debt signals heightened financial stress ahead, with inflation expected to stay high and interest rates likely to rise, potentially making borrowing more expensive.

Households are taking on debt at the fastest rate in over three decades as rising living costs force many to rely heavily on credit to cover everyday expenses. Data from the Bank of England revealed that consumer borrowing increased by £2.46 billion in the past month, marking the largest monthly jump since records began in 1993.

This borrowing includes car finance, personal loans, and notably credit card lending, which rose by £1.18 billion—the biggest monthly increase since 2004. The figures suggest that consumers are increasingly turning to credit as a means of maintaining spending amid soaring energy and fuel prices that have eroded disposable income.

At the same time, a separate survey conducted by accountants PwC highlighted the worsening financial strain on workers. Only 35 percent of respondents said they could afford discretionary expenses such as savings and holidays after covering essential bills, down from 45 percent a year earlier. The survey also found that 59 percent of workers felt increased pressure at their jobs due to financial stress, leading to higher stress levels, longer working hours, and a desire to change employment. Concerns about economic uncertainty and the impact of artificial intelligence on job security were also reported.

Economists have attributed the surge in borrowing to households’ efforts to cope with the rising cost of living. Matt Swannell, chief economic adviser to the forecasting group ITEM Club, described the data as "tentative evidence" that consumers are using credit to offset declines in spending power. Similarly, Rob Wood, chief UK economist at Pantheon Macroeconomics, suggested that increased borrowing and lower savings are enabling consumers to "smooth through" financial challenges brought on by higher energy costs.

However, not all analysts view the trend negatively. Katie Clinton, a financial services adviser at KPMG UK, proposed that stronger borrowing might also reflect a degree of confidence in future improvements to personal finances and the broader economy. She cautioned, though, that persistent inflationary pressures continue to squeeze disposable incomes, making borrowing a necessity for many.

The rise in consumer debt comes amid mounting economic pressures. Prime Minister Andy Burnham has pledged measures aimed at providing relief to households, including the removal of VAT on energy bills and reducing public transport costs. Despite these efforts, global events such as the ongoing conflict in Iran have disrupted oil and gas supplies, driving energy prices to near three-year highs. Diesel prices are already at record levels, and a new energy price cap set to take effect has raised forecasts for bills further.

Looking ahead, the Bank of England anticipates inflation will remain elevated, potentially exceeding 4 percent by early next year—double its 2 percent target. This outlook suggests more financial hardship for consumers as interest rates are expected to rise multiple times over the coming year in an attempt to curb inflation, which could increase the costs associated with borrowing. Meanwhile, factors such as drought-affected harvests and the El Nino weather phenomenon are expected to put additional upward pressure on food prices.

Collectively, these developments highlight the growing challenges facing households navigating an increasingly expensive economic environment.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.