Consumers holding back on borrowing
Personal loan, credit card and overdraft borrowing is being repaid at the highest rate since January 2011.
The British Bankers’ Association (BBA) reported net consumer credit repayments of £305 million in February.
Consumers borrowed £7 billion on credit cards but £7.3 billion was repaid.
The ongoing squeeze on household incomes is making consumers more careful with their spending with a net repayment in debt being made for six out of the past seven months.
The BBA also reported that the number of mortgage approvals fell to 33,103 in February from 38,000 in January when it was at the highest level for two years.
The decline was attributed to a drop in the number of first-time buyers trying to purchase a property before the end of the stamp duty holiday on properties under £250,000.
BBA statistics director David Dooks said: “Businesses and households continue to be cautious about their finances in the face of difficult economic times and this shows up in a reluctance to take on new credit, or where possible, seeking to pay back bank borrowing.”
In related news comparethemarket.com has calculated that UK consumers are paying £6.5 billion a year in credit card interest.
The comparison site based its calculations on March 2012 official UK Debt Statistics.
The average interest rate on credit card lending is 18 per cent, while the Bank of England base rate is just 0.5 per cent.
Comparethemarket.com is advising consumers to compare deals in order to find the best interest rates.
Simon McCulloch, Director of Money at comparethemarket.com, said, “The cost of servicing credit card debt can really add up.”
“Credit card debts attract interest due to people not paying off the full total each month. This is why it’s worth looking around to find a good deal on interest rates.”