Consumer borrowing rises

Posted on April 1st, 2011 | Categories - News

Consumer borrowing has increased but savings are also on the up.

More deposits were made in savings accounts than withdrawals in February.

Mortgage borrowing and the take-up of unsecured loans increased in February, according to figures revealed by the Bank of England.

Mortgage approvals hit 46,967, up by 815 from January’s statistics, with cases of remortgaging also rising to a 26-month high.

The figures indicate that a number of home owners who have variable rate mortgages have been signing up to fixed rate deals in preparation for an interest rate rise, which would push up their payments considerably otherwise. Experts have predicted that the Bank of England will have to raise interest rates in order to curb rising inflation.

The data also highlighted that an increase in the number of personal loans and overdrafts meant that unsecured debt rose by £768 million. However, the figures were relatively low when compared with debt and mortgage levels recorded before the start of the recession.

On the other hand, separate figures from the Building Societies Association (BSA) showed that many people are trying to make a saving. Account holders deposited £150 million more into savings accounts than they withdrew in February.

Adrian Coles, director general of the BSA, said: “Following the usual withdrawal from savings accounts in January as households pay off their Christmas bills, it is pleasing to see a modest increase in savings balances at mutuals in February”.

He added: “With earnings growing at a slower rate than prices, and imminent rises in some tax rates, it is likely to be difficult for households to substantially increase the amount they save over the months ahead”.