Debt Management and IVA help providers are concerned at reports that UK consumers are retuning to their old ways when it comes to spending money on plastic. New UK borrowing on personal loans, overdrafts and credit cards has overtaken the amount being paid off by consumers for the first time in six months, sparking fears that reckless spending could cause an increase in the number of consumers facing financial difficulty, and in need of a debt help solution, IVA advice or a Debt Management Plan.
According to the bank of England, unsecured consumer credit rose £52m in the month of December. This was mainly driven by credit card borrowing.
For the same period, the number of mortgages that were approved for house purchases fell slightly compared with the previous month, to 59,023. This is still higher than the past six month’s average.
IVA and Debt Management companies have noticed a trend during the downturn where consumers have been inclined to pay off debts, however this appears to be reversing. Some people have been reluctant to save particularly with interest rates being so low. For five months in a row, repayments have outstripped new unsecured consumer credit.
The main cause is credit card debt which has risen by £195m. In an effort to get out of debt, many people have enterd debt Management progarammes or signed up for an IVA. The demand for overdrafts and personal loans has remained low, with repayments topping new agreements by £143 million.
The total amount of net borrowing by individuals rose by £1.2 billion in December, which is double the average of the previous six months. Most of the borrowing is in the form of mortgages.
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