UK households pay back £100m of debt in August

Saturday, 24 September 2011 10:30

British consumers paid back over £100 million of borrowing in August, according to the British Bankers Association (BBA).

Figures released on Friday reveal that repayments on unsecured lending outpaced new borrowing by £100 million. British consumers seem to be following the lead of the coalition government and paying down debt, following their own individual deficit reduction policies.

The figures relate to borrowing and repayment on loans, credit cards and overdrafts. The news backs up data that shows UK consumers are spending less on the high street, bad news for retail sales and economic growth.

The one area that does show an increased level of borrowing is in home loans. The number of mortgages approved increased by 14 per cent on a year ago and was up on July, though mortgage lending is still down compared to historical levels.

The number of mortgage approvals rose to 78,288 in August, up from 75,314 in July.

Howard Archer, Chief UK & European Economist for IHS Global Insight, commenting on the increase in home loans said: “This needs to be put into perspective. Although they were at a 15-month high in August, there is currently little evidence that housing market activity is really shifting up a gear. Indeed, at 35,226 in August, mortgage approvals were only 62% of the average monthly level of 57,059 seen since 1997.”

David Dooks, statistics director at the BBA, believes the lending figures reveal that UK consumers are keen to pay down existing debt and take advantage of low interest rate levels.

He said: “The banks' new mortgage lending has ticked up in the past couple of months with higher buy-to-let demand, and some business sectors are edging towards year-on-year borrowing growth, although the general landscape is one of households not wanting to take on more borrowing and businesses waiting for trading conditions to improve before borrowing to expand or invest. Against this backdrop, paying down existing debt dominates the net lending figures."

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