Consumer Borrowing Reaches Five-Year High

Fri, 04 Apr 2008

UK consumer borrowing through credit cards, overdrafts and loans rose to £2.35 billion in February, its highest level for more than five years.

New figures from the Bank of England have revealed that the huge rise in consumer credit was driven by a £2 billion surge in borrowing through loans and overdrafts, the biggest increase since the Bank's figures began in April 1993.

Meanwhile outstanding debt on credit cards increased by some £350 million in February, compared with a rise of £120 million in January.

Economists expressed their surprise at the rise as it was generally thought UK consumers were tightening their belts due to the affects of last year’s credit crunch .

But many now believe that the figures are an indication of over-reliance on credit by cash-strapped consumers, with people trying desperately to borrow money while they still could.

Howard Archer, chief UK and European economist at Global Insight, said: "February's jump in consumer borrowing is very surprising, and it could be a consequence of people looking to borrow while they still can, amid fears that tightening credit conditions will make this increasingly difficult over the coming months."

Other figures released by the Bank also showed a fall in the amount of money consumers were withdrawing from their homes .

During the fourth quarter of 2007, homeowners unlocked just £7.28 billion compared £10.84 billion in the previous quarter and £13.73 billion during the same period the previous year.
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