Consumers show a "reluctance to take on new credit" in difficult climate

The Momentum UK Team 26 March 2012

Borrowing is down as consumers work to pay off their credit cards, loans and overdrafts according to the latest report from the British Banker's Association (BBA).

Repayments have outstripped borrowing by £305 million, according to the report, with credit card repayments alone exceeding lending by £39 million in the month of February.

The number of mortgages approved for house purchase fell to 33,103 in February, while remortgaging approvals dropped to their lowest level in over a decade. Gross mortgage lending was down too by 1.9% compared to the same month last year, according to the report.

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.

"Confidence will be helped in the coming months by official schemes to support the mortgage market and stimulate business demand for credit."

Nevertheless according to the Statistical Yearbook report released last week by the charity Consumer Credit Counselling Service (CCCS), many households in the UK are still "swimming against the tide" when it comes to debt.

While many households owe less and spend less they continue to struggle to meet everyday expenses under the burden of debt.

Speaking on the figures included in the Yearbook Consumer Affairs Minister Norman Lamb said:

"The yearbook shows that unmanageable debt is rising in all parts of society. It reminds us how vitally important it is to understand the needs of those who seek help, so that we can give them the right kind of help.

"We want people to be better informed and able to make good financial choices, taking back control of their money."