Consumer borrowing surges in January

Figures from the Bank of England today revealed that British consumers borrowed £500 million in January through credit cards, loans and overdrafts, once repayments were taken into account – the highest level since November 2008.

According to the Bank, the increase was almost double the £265 million rise seen in the previous month December, and comes after consumers had repaid more than they borrowed during five of the previous six months.

However, January’s borrowing figure is still well below levels experienced during the credit boom years.

Meanwhile, consumers repaid £819 million more mortgage debt than was advanced to new borrowers during the month, the biggest net repayment in over a year.

The Bank also revealed a sharp fall in the number of new mortgages approved in January.

According to the Bank, mortgage approvals for the month stood at 48,198, down from 58,223 in December and slightly under analysts’ expectations of 50,000.

However, while the figure is 43% higher compared with January 2009, it represents the lowest level since May 2009.

The Bank attributed January’s sharp fall to the end of the stamp duty holiday, which prompted a rush to buy homes in December.

In the meantime, the Bank said during 2009, financial institutions wrote off £4.12 billion in credit card loans – much higher than the previous record amount of £3.2 billion in 2008.

In the meantime, the Building Societies Association (BSA) said consumers continue to withdraw their savings from mutuals.

According to the BSA, its members withdrew £755 million during the month as it described January as a “challenging” month for savers.

Furthermore, the BSA said there is little incentive for people to increase savings whilst the Bank rate remains at its current low level, with many opting to repay debt instead.

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