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Consumers look to pay off debts

Consumers look to pay off debts

Category: Money

Updated: 29/09/2010
First Published: 29/09/2010

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Consumers are increasingly looking to pay down their debts, rather than take out new credit, figures from the Bank of England show.

Net consumer credit fell by £120 million in August, comprising of overdrafts, personal loans and credit cards.

It is the biggest fall seen in a month since November 2009.

The figures suggest a change in the financial behaviour of Britons, who have been stung into action by the effects of the credit crunch.

The stricter lending criteria adopted by the UK's banks and building societies has also stemmed the flow of credit.

With people choosing to pay off their debts, the amount consumers now owe is the lowest since February 2008, although consumers still have some way to go to pay back a collective balance of £1.43 trillion.

The figures will no doubt disappoint the deputy governor of the Bank of England, who this week said that one of the reasons for the current economic policy of low interest rates was to encourage people to spend, rather than save.

However, with the collective consumer debt remaining relatively stable in the last couple of years, people seem unwilling to ramp up their spending, especially in light of double dip fears.

Figures from the Bank also showed that the number of loans approved for house purchases fell slightly in August.

There were 47,372 approvals in the month, down from 48,346 in July.

By contrast, loans for remortgages increased from 26,765 to 28,042 in August, with numbers also above the six month average.

Many homeowners have chosen to stay on the standard variable rate in recent times because low interest rates have meant preferable mortgage repayments.

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