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Consumers look to pay down debts

Consumers look to pay down debts

Category: Debt

Updated: 14/12/2012
First Published: 23/03/2012

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 It is now over 6 months old so the content may be out of date.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 looked to give their finances a boost in February, with paying down debts the order of the day.

The British Bankers' Association (BBA) says that Britons paid off £305 million more than they borrowed on credit cards, loans and overdrafts last month.

In fact, it was the first month in three years that the amount consumers borrower through loans and overdrafts fell.

Spending on credit cards remained at the level seen in the last six months at £7 billion, although people paid slightly more off their balances.

The cautious behaviour combined with weak demand for new borrowing has contributed to unsecured lending by banks falling by 1.2% over the last year.

"Businesses and households continue to be cautious about their finances in the face of difficult economic times and this shows up in an reluctance to take on new credit, or where possible, seeking to pay back bank borrowing," said David Dooks, statistics director for the BBA.

With the end of the stamp duty holiday approaching, the number of mortgage approvals fell back from January's two year high of 38,000 to 33,103.

But with the stamp duty holiday effectively being replaced by NewBuy as the initiative to kick-start the housing market, there is hope that numbers will begin to rise again.

Buyers will be able to secure their first home with as little as a 5% deposit, while thousands of jobs will also be created to build the properties.

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

Despite some £7.9 billion lent in the month, a steady stream of repayments from homeowners meant net lending only amounted to £545 million in the month.

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