Bank of England reports increase in personal debt
Bank of England figures for May show an increase in consumer debt, with new unsecured borrowing £732m higher than repayments.
This represents a substantial increase from the average of the past six months of £403m.
Borrowing through loans and overdrafts increased sharply in May according to the Bank’s figures.
However credit card borrowing increased by just £70m.
The Bank of England’s latest figures raised concern that consumers are being forced to borrow money to fund their day to day spending.
Commenting on the increase in consumer debt, Howard Archer, chief UK economist at IHS Global Insight, said: “It may have been affected by some people having to borrow more as a consequence of the extended squeeze on their purchasing power.
“Latest data from the Office for National Statistics show that households’ real disposable income fell 0.9 per cent quarter-on-quarter in the first quarter of 2012 after a similar drop in the fourth quarter of 2011.”
Statistics from Credit Action, the national money education charity, highlight the extent of consumer debt problems in the UK.
The charity estimates that every day in the UK 314 people are declared insolvent or bankrupt, 1,473 Consumer County Court Judgements (CCJs) are issued and 105 properties are repossessed.
Many people face losing their homes because of debt with 182 mortgage possession claims issued every day and 141 mortgage possession orders made.
The Bank of England’s latest figures highlight a decline in the number of mortgage loans being granted.
Just 51,098 mortgages were granted for house purchase in May, with a total value of £7.6 billion, the lowest total since March.
The shortage of mortgages, the increase in consumer debt and high levels of unemployment are all expected to create downward pressure on house prices.