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Consumers prefer to pay off debt than save

Consumers prefer to pay off debt than save

Category: Money

Updated: 23/06/2010
First Published: 23/06/2010

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 It is now over 6 months old so the content may be out of date.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 choosing to use their spare cash to pay off credit cards and loans rather than save.

With the returns on offer from many savings accounts historically low, it appears many people are prioritising the repayment of their loans instead.

High street banks confirmed the amount they lent to consumers in the form of unsecured loans was less than the amount they received in repayments during May.

The number of purchases made with credit cards also continued to weaken, despite people beginning to spend more on the high street, according to the British Bankers' Association (BBA).

Although demand for personal loans remained stable, the latest figure was still 13% down on a year earlier.

"The low interest rate environment is resulting in customers choosing to reduce or pay off borrowing, particularly personal loans, rather than saving," said BBA statistics director, David Dooks.

The data also revealed that mortgage approvals by high street banks crept slightly higher in May.

The number of loans approved for house purchase increased by 2% on the previous month to 36,709, while there was a small drop in the number of loans approved for remortgages.

High street banks are now the main providers of finance in the mortgage market, supplying three quarters of all new home loans.

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