Consumers in UK are not in favour of borrowing, and are repaying almost as much as they are borrowing, as has been revealed by the latest report from British Bankers’ Association (BBA). The unsecured consumer credit repayment amount in November, being the 9th repayment of 2012, was £57 million, following a total repayment of £247m in the previous month.
BBA’s reports shows how companies are reluctant to finance through debt in the unclear economic scenario, avoiding the added risk of going bankrupt or entering receivership on stock and property. The repayment of £295 million through personal loan and overdrafts repayments easily outweighed the credit card borrowings of £238m. BBA, in its report, also stated that loans outstanding was just about half the peak amount observed in late 2007 and beginning of 2008, when the economy crumbled.
Commenting on the situation, the UK & European Economist with IHS Global Insight, Howard Archer stated, “Consumers are debt averse, that’s evident from the net repayment figures. And, consumers are continuing their debt reduction efforts.” Despite unattractive interest rates, people are on a deposit spree. Levels of personal savings have grown by 6.3%, that’s £3bn, over the last year.
Statistics director with BBA, David Dooks said, “Households and businesses are similar in the sense that both are keeping cash safe. Borrowings are soon matched with repayments. Deposits are increasing at an annual rate of 6%. Companies are not expanding or expanding, focusing on building up cash instead.”
BBA also stated that house owners were looking to make use of the low interest rates by quickly paying their mortgages, and improving levels of equity. This has resulted in the flattening down of the net mortgage lending which stands at £200 million in the month of November.