Credit Card Borrowing Falls for the Fifth Month in Succession
Figures released by the British Bankers’ Association (BBA) which show that overall UK credit card borrowing feel for the fifth month in row will leave many British economist happy that a rise interest rates may be delayed but may have many industry watchers concerned that the UK is finally getting over its debt addiction.
The latest figures from the BBA show that overall UK credit card borrowing fell by £100 million during the month of September and for the first time in decades net repayments on UK credit cards were consistently higher than net payments.
However, it may be a little early to say that the UK debt market is coming to a slowdown, with the UK’s Council of Mortgage Lenders (CML) figures showing that September was yet another record month for mortgage lending in the UK with lending jumping 7% year-on-year to £29.5 billion. While this figure shows an 11% decline on the month-on-month figure from August, many building societies and banks have confirmed that August’s recorded £33 billion in lending was an all-time record.
However, questions do remain over how much new mortgage lending is being made to first time home buyers in the UK, with many Brits complaining more than ever that it is now virtually impossible for them to get on the UK housing market. As such, analysts may well be crunching the numbers to see if there is a direct correlation between homeowners in the UK withdrawing equity from their properties, by re-mortgaging their UK homes, to repay their existing outstanding unsecured debt, such as their credit card debt, and a genuine reflection that this rise in home mortgage lending in the UK shows a vibrant UK housing market.
A major concern that will be on many industry watchers minds will be that UK homeowners are opting to take out the excess equity in their properties. With interest rates on the rise, any slowing down of the UK housing market in which many homeowners have used the equity in their property to fund their day-to-day lifestyle, leaving little or no residual equity in their property, could well lead not only to a slowing down of the UK housing market, but more worryingly to potential problems with making home loan repayments.
In meantime, the good news is that UK credit card spending does finally seem to be firmly in check for now and many Brits do appear to have been getting the message that there are far cheaper and easy ways to debt fund their life than by borrowing long-term on expensive unsecured UK credit cards that charge high APRs.
Richard Smith
25th October 2006
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