August 2025 Consumer Borrowing Trends
- Thowsif Mukit
- Aug 28
- 3 min read
The summer of 2025 has brought a quieter rhythm to consumer lending across the UK. After two years of steady borrowing growth, the latest Bank of England figures reveal that households are becoming more cautious. The number of new credit card and loan applications fell again in July, marking the fourth consecutive monthly decline. This shift reflects not only tighter lending conditions but also the lingering impact of higher living costs.
For small businesses and individuals alike, borrowing decisions now require more consideration than ever. Many households are focusing on repaying existing debt rather than taking on new credit. Meanwhile, higher interest rates continue to limit affordability, affecting both personal and business finance.
Consumer Borrowing Trends
The Consumer Borrowing Trends taking shape this summer tell a clear story of caution and restraint. Households are borrowing less, saving what they can, and focusing on paying down existing debt as the cost of credit remains high. The Bank of England’s Money and Credit report for July 2025, published in early August, shows that annual growth in consumer credit has slowed further to just over five percent. This marks one of the weakest readings since 2022.
Lenders are reporting fewer applications for personal loans and new credit cards. Higher interest rates continue to discourage borrowing, with average rates for personal loans still around nine percent and credit card rates above twenty-three percent. Many households are also finding it harder to qualify for new credit, as banks apply tighter affordability checks to reflect the ongoing economic uncertainty.
The ONS Quarterly National Accounts for April to June 2025 reveal that household savings have fallen slightly as living costs remain stubbornly high. The average saving ratio now sits just above six percent, down from the first quarter of the year. This suggests that families are relying more heavily on disposable income to cover essential spending and have less capacity to build financial buffers.
Meanwhile, the HM Treasury Forecasts for the UK Economy, August 2025, highlight how this tightening in credit conditions is expected to slow consumer spending through the rest of the year. Although inflation has eased from its previous peaks, the lagging effects of higher rates are now visible in softer retail activity and lower household confidence. Together, these indicators point to a cautious period ahead, where consumers continue to prioritise stability over new borrowing.
How it impacts you
The current borrowing climate has a direct effect on everyday life. For individuals, the cost of credit has made large purchases less affordable. Buying a car, renovating a property or funding home improvements now requires higher monthly repayments, which can stretch household budgets. Even small borrowing decisions such as using a credit card to cover short-term gaps feel riskier in an environment where rates and charges are high.
For business owners and contractors, personal borrowing often overlaps with business cashflow. Many use personal credit or savings to fund short-term expenses or investment. With borrowing costs rising, this approach has become less sustainable. It also highlights the importance of separating business and personal finances, ensuring each side is supported by clear records and proper planning.
The cautious mood also affects demand for goods and services. As consumers reduce discretionary spending, smaller firms in retail, hospitality and trades may notice slower sales or delayed payments from customers. Recognising these trends early helps business owners adapt pricing, manage credit terms and plan for potential slowdowns in the months ahead.
What you can do
The best response to the current borrowing climate is to take stock. Review all existing credit agreements, from mortgages and personal loans to credit cards and overdrafts. Check whether your interest rates are fixed or variable, and understand when any promotional or discounted periods expire. Knowing these details helps you avoid surprises later.
For households, aim to prioritise repayment of the most expensive debt first. High-rate credit cards and overdrafts erode disposable income quickly, and clearing them delivers immediate benefits. Even small overpayments can shorten repayment terms and reduce total interest paid.
For business owners, reassessing financing structures is essential. Explore whether short-term borrowing can be refinanced into longer-term arrangements at more manageable rates. Maintaining accurate cashflow forecasts helps identify pressure points early. If customers are taking longer to pay, plan accordingly and review payment terms to protect liquidity.
Finally, don’t face financial uncertainty alone. At Ledgr Accountants, we work with clients to build tailored cashflow and debt management plans. Understanding how broader borrowing trends affect your circumstances allows for better decision-making, whether you’re saving for growth or simply keeping things steady through the rest of 2025.
Thowsif Mukit
Commercial Manager
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