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British consumers freed themselves from austerity in December, ramping up credit card debt and overdrafts to make the most of Christmas.
Figures from the Bank of England show that new borrowings outstripped the amount being paid back for the first time since June.
Unsecured consumer credit rose by £52 million in the month, largely driven by credit card borrowing, said the Bank.
Howard Archer at Global Insight said: “It is likely that the very modest rise in unsecured consumer credit in December was the consequence of a significant number of people cutting back on their net repayment of loans and other advances during the month in order to help pay for their Christmas celebrations.”
Lately Britons have been paying down debts for fear of unemployment and because interest rates on savings are so low. This trend is likely to have resumed.
Andrew Goodwin of Ernst and Young said: “The small increase in consumer credit is likely to be linked to consumers bringing forward purchases to avoid the VAT increase and a relapse is likely next month.”
New mortgage lending also slipped a little, suggesting that the housing market may be taking a breather after recent signs of recovery. Lenders granted 59,023 loans to buy homes, down from 60,045 in November — the first monthly decline since November 2008.
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Reader views (3)
BoE rates mean nothing since you and I cannot borrow at 0.5%.
Instead the real interest rates, i.e. credit card and mortgage rates are steaming ahead. Double-dip indeed, and BIG dip for house prices since people will need to sell to re-pay these huge personal debts.
- Madmax, London, UK., 01/02/2010 16:30
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Double dip anyone?
The final straw was after the banks tried to pay themselves huge bonuses. What are the odds on the Bank Of England raising rates by eg 0.5% later in the year and then the high street banks raising by 0.5%+some to finance a bonus. I intend to spend less in 2010 than 2009, so the shoes will last a month longer and the summer holiday will not happen for me. Instead I will pay off the mortgage little by little. Sorry Philip Green et al but I won't be buying as many clothes. Here comes the double dip.
- Ricky-Of-Lambeth, se1, 01/02/2010 16:09
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Credt cards and overdrafts?
So nothing has changed then?
But i guess that is ok, as interest rates are so low that debts mean even less than they did two years ago.
Double dip anyone?
- Mickinlondon, london, 01/02/2010 13:42
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