UK consumer borrowing hits five-year high

[questionmark]

UK consumer borrowing hits five-year high

By Nick Allen

Last Updated: 2:58pm BST 02/04/2008

The amount that Britons borrowed through credit cards, overdrafts and loans has soared to the highest level in more than five years, signalling that cash-strapped consumers are feeling the pinch.

Consumer credit rose to £2.35bn in February, the highest level since October 2002, according to figures released today from the Bank of England.

The increase was driven by a £2 billion jump in lending through loans and overdrafts, the biggest increase since the Bank's figures began in April 1993, while outstanding debt on credit cards increased by £350 million.

At the same time, the Bank's figures showed that the number of mortgages approved for people buying a home fell by nearly 40 per cent during the past year.

Only 73,000 home loans were approved for people moving house in February, compared with 120,000 in the same month of 2007, making it the second lowest total since July 1995. Mortgage approvals dipped to 72,000 last December.

The latest figures confirmed the slump in activity in the UK property market and reinforced expectations that house prices will cool swiftly over the next year, with some analysts predicting a 5 per cent fall.

House prices have trebled in the last decade. The value of mortgages advanced also remained subdued in February with net lending remaining broadly unchanged at £7.45 billion. That was the second lowest figure since June 2005 and down on both the recent monthly average and the £10.03 billion advanced in February 2007.

A combination of falling house prices and tighter lending criteria by mortgage lenders is now causing potential buyers to sit on their hands.

Howard Archer, chief UK and European Economist at Global Insight, said: "The weak mortgage approvals data from the Bank of England confirms that the housing market was already under major pressure from the dangerous combination of stretched affordability and tighter lending conditions even before the recent escalation of the credit crunch."

Full story, source: The Telegraph

[Bella-Angelique]

One hopes it does not get as bad as in the USA.

It is not something you would wish on family.

[muddpuppy]

One hopes it does not get as bad as in the USA.

It is not something you would wish on family.

Its already getting "that bad" here in the states. People keep borrowing knowing they cant pay it back. and every one wonders why the economy is getting so bad.

Edited April 2, 2008 by muddpuppy

[stevewinn]

it doesnt include the amount borrowed through loan sharks,............ i know a few people who use them, so if we add this type of borrowing the consumer borrowing figures must be worse?

[questionmark]

it doesnt include the amount borrowed through loan sharks,............ i know a few people who use them, so if we add this type of borrowing the consumer borrowing figures must be worse?

elemental dear Steve....

[seanblist20]

Reports suggest that customers borrowing was at its highest level in five months this Jan, as Americans were applying for auto loans and school loans at a renewed pace. The $16.2 billion boost in customer borrowing followed a $15.1 billion increase in December, according to Federal Reserve reps and a group of 27 economists surveyed by Bloomberg. Because of that Banks became more cautious in extending credit, making it more difficult for people to borrow.

[spud the mackem]

it doesnt include the amount borrowed through loan sharks,............ i know a few people who use them, so if we add this type of borrowing the consumer borrowing figures must be worse?

They should be banned from advertising on T.V. at 49.9 % a.p.r. interest rates.

[skookum]

I grew up in a time when borrowing was rather looked down on. My grandparents always went on about saving for something and not borrowing to get it. Even with mortgages people use to say 'don't over stretch yourself' and strict borrowing limits were set on them.

I was personally amazed in the 2000's when everyone became house wealth mad and used their homes to borrow for live lifestyles far beyond their normal means. Suddenly the attitude changed to 'you need to stretch yourself to the limit to get on the housing ladder'. I knew friends who had 5-6x self certified mortgages or liar loans because they were scared by TV, parents or friends that if you don't do this you will miss the boat.

The country has become credit mad and the small crash a few years back hasn't put people off just took away availability. I blame successive Governments that have propped up the system rather than let the markets adjust and re-educate people.

Edited September 25, 2014 by skookum