Card lending down as debts paid off

 

Credit card lending has contracted by the biggest monthly amount
since 2006 amid consumers' determination to pay down their debts, Bank
of England figures showed today.

Card repayments outstripped new borrowing by £118 million in April, the largest amount since August 2006, when they outweighed borrowing by £152 million.

Other types of personal lending rose by £400 million, a more subdued increase than the £500 million rise seen in March, showing how people lack the appetite for borrowing amid economic uncertainty and high unemployment.

The figures follow a recent PricewaterhouseCoopers (PwC) report which argued that credit card use could fall into permanent decline, with the rise of digital technology and payday lenders changing how people access credit.

That report argued that the innovation and convenience offered by "alternative lenders" such as high interest payday loan companies was encouraging a broader selection of consumers to choose their services over banks.

Melanie Bowler, an economist at Moody's Analytics, said: "Households are favouring paying down debt, rather than undertaking new borrowing. Demand for credit will remain contained through 2012 amid lingering job security concerns.

"Interestingly however, there has been something of a boom over the past year in demand for relatively new payday loans, which offer short-term loans designed to be repaid typically within a month-and-a-half.

"With these bridging loans offering exorbitant repayment rates, the risk of UK households actually falling deeper into debt is increasing."

The Bank of England figures also provided further evidence that people are having a tougher time taking out a mortgage, as approvals remained way below their long-term average.

There were 51,823 approvals for house purchase in April worth £7.6 billion, a 1.5% increase on the previous month, but still under the previous six-month average of more than 53,000 approvals.

The figures have been modestly creeping up after hitting a seven-month low in February, just before a two-year stamp duty holiday for first-time buyers ended the following month.

The Bank of England expects lenders to tighten their credit criteria further in the coming months amid the weak economy and the eurozone crisis, making it harder for people to meet the requirements to take out a mortgage.

Remortgaging approvals also rose last month to 31,214 approvals worth £4.3 billion, the highest figure since January and nudging slightly above their six-month average.

Analysts have suggested that recent remortgaging increases have been due to concerns from home owners that lenders are set to put their mortgage rates up further following a spate of recent announcements about rises.

More than a million home owners saw their mortgage rates increase at the start of this month, with lenders blaming the weak economy and the increased cost of funding a mortgage.

A stamp duty rate of 7% on properties worth over £2 million was also imposed in March, raising concerns that this will disrupt the sluggish housing market further.

Ms Bowler said: "Mortgage lending in the UK is around a tenth of its pre-recession value.

"Lingering difficulties in the property market as well as continuing reluctance to lend on the part of banks is hindering the recovery in secured lending."

Simon Tombs, an economist at Capital Economics, said the latest lending figures paint a "fairly weak picture".

He said: "Granted, the number of mortgages approved for new house purchase rose from 51,100 to 51,800, despite the fact that the stamp duty holiday for first-time buyers ended at the end of March.

"Nonetheless, the level of approvals is still some 3% below its level at the end of last year, and surveys suggest that new buyer interest is increasing at a fairly sluggish pace."

PA

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250 ...

Day In a Page

Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Transfer window: Ten things we learnt

Ten things we learnt from the transfer window

Record-breaking spending shows FFP restraint no longer applies
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent