Households leaned on their credit cards for support in February as consumer credit borrowing grew at the fastest annual pace in two years.

The annual growth rate for all consumer credit accelerated to 4.4% in February, up from 3.2% in January, according to Bank of England figures.

This was the highest annual growth rate since February 2020 – the month before the first UK coronavirus lockdown started.

Consumer credit includes forms of borrowing such as credit cards, overdrafts, personal loans and car dealership finance.

Within the 4.4% annual increase, borrowing using credit cards increased by 9.4%.

More and more, what we are seeing is that people experiencing problem debt have problems meeting not just their credit repayments, but also their priority bills

The figures were released as households are being surrounded by rising bills, including for energy, food, rent, mortgages, council tax, transport, as well as a hike in national insurance to help pay for health and social care.

Households borrowed an additional £1.9 billion in consumer credit in February, compared with a pre-pandemic average of £1 billion in the run-up to February 2020, the report said.

Credit cards accounted for £1.5 billion of the additional borrowing in February 2022, with the remainder made up of other forms of credit such as car dealership finance and personal loans.

Robert Alster, from Close Brothers Asset Management, said: “Strong credit card lending may signal that many households have already exhausted pandemic savings and are sticking spending on plastic.”

Thomas Pugh, an economist at RSM UK, said: “Normally, a rise in consumer credit is a good indication that consumption is growing strongly because it tends to expand when the economy is good. People feel confident enough to borrow and splurge on big-ticket items, such as cars. This time may be different, though.

“A rise in consumer borrowing over the next year is more likely to be a sign that high inflation is driving consumers to maintain their lifestyles by borrowing.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said consumer credit growth “likely reflects households attempting to maintain their consumption at a time when real disposable income is falling sharply, rather than them going on a spending spree”.

The numbers we may see increase are defaults later in the year as people struggle to service personal loans and credit cards

Peter Tutton, head of policy, research and public affairs at the StepChange Debt Charity, said: “More and more, what we are seeing is that people experiencing problem debt have problems meeting not just their credit repayments but also their priority bills.”

He said that as the year goes on, more support will be needed “for those who are simply unable to absorb the cost of living increases into their household budgets”.

He added: “In the meantime, we urge anyone struggling to make ends meet to seek help from a reputable debt advice organisation at an early stage, rather than turning to potentially more harmful coping strategies such as high-cost credit.”

There were also signs that squeezed households were able to put less away in savings, with £5.1 billion flowing into accounts held with banks, building societies and NS&I in February.

This compares with an average monthly net flow of £5.5 billion during the 12-month pre-pandemic average up to February 2020.

Karim Haji, head of financial services at KPMG UK, said: “As far as households go, the spring data is going to be very telling.

“A trend in the early part of the Covid-19 pandemic was an increase in household bank deposits but, with rapidly rising inflation, it seems unlikely we’ll see the same happen this year.

“Instead – sadly – the numbers we may see increase are defaults later in the year as people struggle to service personal loans and credit cards.”

The number of mortgage approvals made to home buyers, meanwhile, fell slightly to 71,000 in February, down from 73,800 in January, but remained above the pre-pandemic average leading up to February 2020, the bank said.

We can expect to see mortgage advances and other measures of transaction activity start to ease as we head towards the autumn

Lawrence Bowles, director of research at Savills, said that with the Bank of England base rate looking likely to increase further through the year: “We can expect to see further rises in mortgage interest costs.

“That will limit what buyers can pay, especially with the affordability stress tests currently in place and rapidly rising energy prices putting pressure on household finances.

“While the imbalance between resilient demand and very low level of stock available is continuing to support (house) price growth, we can expect to see mortgage advances and other measures of transaction activity start to ease as we head towards the autumn.”

Nitesh Patel, strategic economist at Yorkshire Building Society, said dampened house price growth “would be welcomed by potential first-time buyers”.

Approvals for remortgaging (which only include remortgaging with a different lender) rose to 48,200 in February.

This was the highest total for remortgage loans since February 2020 but still below the average seen in the year leading up to the pandemic, according to the Money and Credit report.

Net borrowing by large non-financial businesses jumped to £4 billion in February, up from £1.8 billion in January.

Small and medium-sized non-financial businesses (SMEs) made a net £475 million repayment, which was smaller than a £791 million net repayment made in January.