Consumers cut back on borrowing

Wednesday, 29 October 2008 12:00

Consumers cut back on their borrowing in September, figures from the Bank of England show.

According to the latest data from the Bank of England, consumer credit grew by £0.3 billion in September, below August's growth of £1.1 billion, based entirely on credit card borrowing.

On other loans and advances, there was a net repayment in September of £34 million, suggesting more people are paying their loans back than taking out new ones.

Howard Archer, analyst from Global Insight, said: "Rising debt levels, historically low household savings rates and sharply weakened equity prices mean that there is a pressing need for many consumers to improve their finances.

"Consequently, an increasing propensity to save seems likely to significantly limit consumer spending over the coming months, along with many other factors."

The number of mortgages approved in September rose slightly from August, to 33,000 from 32,000 in August, at a value of £4.2 billion.

Dr Archer added: "Despite the very limited improvement from August, the Bank of England mortgage data for September still showed that housing market activity continued to be decimated by the highly damaging combination of stretched buyer affordability and tight lending practices."

The figures put more pressure on the Bank of England to cut interest rates further next week, Dr Archer said.

The National Association of Estate Agents (NAEA) has reported the number of first-time buyers rose in September and the number of sales per agent increased slightly.

The NAEA attributes the rise in first-time buyers to the government announcement of a stamp duty holiday on homes costing less than £175,000 last month.

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