Loans -
Consumer loans hit five year high - 02/04/2008
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A survey from the Bank of England has shown that consumer loans through credit cards, overdrafts and personal loans have soared to their highest level for more than five years.
A significant reason behind the increase is the £2 billion jump in lending through loans and overdrafts, the biggest increase on record.
Total consumer debts stands at £2.35bn with the £350 due to outstanding debt on credit cards.
Mortgage debt has remained static in contrast with net lending unchanged at £7.45 billion, the lowest recorded figure since June 2005. A combination of falling house prices and tighter lending conditions are the most significant reasons for the change.
Vicky Redwood, an economist at Capital Economics said: "Consumers are simply resorting to unsecured borrowing in their time of need; a similar pick-up in consumer credit was seen in the United States as its own slowdown gathered steam in the middle of 2007. Either way, a rise in unsecured borrowing out of desperation would hardly be a positive development."
The main problem now is that if consumers have little financial flexibility, it will eventually filter through to a slow down in high-street spending, a major factor in keeping the economy buoyant in the face of crisis.
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