A surge in consumer lending means British banks are at risk of incurring losses, the Bank of England said on Tuesday, warning that some might be letting credit standards slide as they compete to offer debt to households. 

Consumers ramped up their borrowing by more than 10 % late last year, the fastest growth in a decade, which helped drive strong economic growth despite June's vote to leave the European Union. Rates of saving fell to their lowest in more than 50 years.

But the economic outlook is now darkening as households face rising living costs in the wake of sterling's tumble against the dollar and the euro, and wage growth is expected to remain below its long-run average.

Last week the BoE said it was taking a closer look at consumer borrowing, and on Tuesday it gave more details.

"An easing in credit supply conditions appeared to have contributed to the growth in consumer credit, with intense competition in some segments of the market," the BoE said in a summary of the latest meeting of its Financial Policy Committee, which looks at financial stability risks.

Credit card companies were offering longer interest-free periods to entice borrowers, while other lenders were offering larger unsecured loans and had cut the interest rates they charged by more than for less risky mortgage rates.

The Financial Conduct Authority, a separate regulator, proposed on Monday that credit card companies should freeze lending to some of the 3.3 million Britons who paid more in interest and charges than they have repaid debt.

The BoE is now also looking into the risks from Britain's lending boom, and could take steps before the end of the year.

But BoE Governor Mark Carney said in January it would be a "big call" for the central bank to rein in rapid growth in consumer lending.

Peter Richardson, a banking analyst at Berenberg, welcomed the BoE's latest focus on consumer credit. Many lenders and investors wrongly assumed that current low levels of loan defaults would persist, even when the economy weakened.

"We think the growth and terms currently seen in consumer credit markets show strong signs of cyclical risk illusion," he said, adding he had recently cut his outlook on Lloyds Banking Group, one of Britain's biggest lenders, to 'sell'.

Consumer borrowing accounts for less than 10 % of banks' stock of lending to British households and companies, while mortgage lending makes up about 70 %.

But the BoE said the relatively short-term nature of much consumer lending meant the average credit quality of a loan book could deteriorate much faster than was the case with mortgage lending.

The BoE has said banks could face 18.5 billion pounds ($23 billion) of losses on consumer loans in the event of a sharp economic downturn, compared with 11.8 billion pounds for mortgages.

Some Britons are already running into difficulty. StepChange, a debt charity, said last week that a record 600,000 people contacted it for help last year.

($1 = 0.8044 pounds)