28/12/12
By Paulette Flahavin
Consumers are paying back virtually as much as they borrow, even though spending on credit cards and mortgages have both increased, according to a consumer banking report.
The British Bankers' Association (BBA) said new credit card spending rose in November to £7.3 billion after six months of recording an average of £7.1 billion.
Even with the increased new spending, the BBA said households are still spending less on their credit cards than the amount they are paying back, as credit repayments in November came to £7.5 billion.
And a major reduction in overdrafts and personal loans was driving a 2.3 per cent decline in outstanding levels of borrowing in areas other than mortgages, the association said.
At the same time, November saw the highest number of home mortgage approvals since January, with 33,634 approvals granted for a total value of £5.3 billion.
November's home mortgage figures are in keeping with the rises recorded in the past few months. Sector analysts are attributing the growth trend to the Government's Funding for Lending programme which was launched in August to increase credit for home-buyers and commercial enterprises.
That said, net mortgage lending has steadily decreased to a "flat balance" because home mortgage holders are making big repayments on their mortgages as they make the best of low interest rates to reduce their debt, the BBA said.
November recorded total gross mortgage lending at £7.7 billion and a nearly equivalent amount for repayments of £7.5 billion.
Earlier in December the Council of Mortgage Lenders said that more than 30 per cent of mortgages secured since 2005 were overpaid.
Personal deposits have seen a 6.3 per cent increase in 2012 to November as consumers have been seeking accounts that pay the best interest rates, meaning strong cash inflows into Isas, the BBA said.
"Households are continuing to repay virtually as much as they borrow and, as people hold on to cash, deposits are growing by 6 per cent annually," said BBA statistics director David Dooks.
"The situation is not dissimilar in the business world - businesses are holding back investment or expansion plans and building up cash reserves."
The year ahead will be challenging for household budgets with the recent series of announced price increases, including much higher energy costs.
About 75 per cent of families are predicting their financial situation in 2013 will get worse or at the very best remain even, according to the financial information firm Markit's consumer research.
November also saw a fall in net lending to non-financial businesses to £3.1 billion, according to the BBA.
The BBA said companies are working to cut their debt levels as they await an improved business environment and an increase in both market and consumer confidence.
