Consumer demand for credit is on the rise
For the first time since June 2009, new borrowing through loans, credit cards, and overdrafts has outstripped the amount being paid back by consumers in the UK.
The rise in consumer spending on credit cards during the previous month is also likely to be due to consumers paying for Christmas festivities”
Driven predominantly by credit card borrowing, unsecured consumer credit rose £52m during December, according to the Bank of England.
During the recent economic downturn, with low interest rates, the trend has seen consumers paying off their overdraft, loans, and credit card debts instead of saving their money. With the Bank Rate set at a low level, and inflation likely to return in the near term, savers are facing difficult conditions.
For five consecutive months, August – November, consumer repayments surpassed new unsecured consumer credit. During December however, the Bank Of England’s figures show that this trend reversed, primarily due to borrowing on credit cards, which rose by a £195m.
"The small increase in consumer credit is likely to be connected to consumers bringing forward purchases to avoid the VAT increase and a relapse is likely next month," said Andrew Goodwin of Ernst and Young.
The rise in consumer spending on credit cards during the previous month is also likely to be due to consumers paying for Christmas festivities, as reported by The Evening Standard.
In December, total net lending to individuals rose by £1.2bn, double the average of the previous six months, with the vast majority of lending in the form of mortgages.
Written by JP Jones ©
