Rising UK Consumer Credit Poses Challenge for Monetary Policy Amid Falling Bond Yields

London | EcoPulse24

Consumer credit in the United Kingdom saw a notable acceleration in November 2025, with net individual borrowing rising to £2.1 billion from £1.7 billion the previous month, surpassing estimates of £1.1 billion. This marks the highest level since November 2023, driven by an increase in credit card borrowing to £1.0 billion from £0.7 billion in October, alongside a slight uptick in other forms such as auto finance and personal loans to £1.1 billion.

Annually, overall consumer credit growth climbed to 8.1% in November from 7.5% previously. Credit card borrowing growth accelerated to 12.1%, the highest since January 2024, while non-card credit expanded by 6.3%.

Meanwhile, UK 10-year government bond yields fell to around 4.51% after reaching a six-week high of 4.539% last week, as bond gains tracked US Treasury movements. Lower oil prices have eased inflation concerns, supporting limited expectations for future monetary easing from the Bank of England.

Markets are currently pricing in one additional rate cut in 2026, expected in the first half of the year, following the Bank’s split decision to lower the rate by 25 basis points to 3.75% in December. Although headline inflation slowed to 3.2% in November, it remains above the 2% target, and any further rate cuts are expected to be gradual. Recent data show weak mortgage demand contrasted with robust consumer borrowing.

Analysis
The concurrent rise in consumer credit and decline in bond yields reflects a delicate balance between domestic demand pressures and the monetary outlook. Strong borrowing, particularly via credit cards, sustains inflation risks, while subdued yields indicate market caution and anticipation of clearer signals from the Bank of England regarding the pace of future easing.