BBA: Economic slowdown responsible for slump in credit card borrowing |
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Mon, 23 May 2005 12:55
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The British Bankers' Association has said that figures for the last months showed that credit card borrowing in the UK fell by £40 million for the first time in more than a decade. Britons appear to be focusing on repayment rather than borrowing, the Association added.
These figures add to the fears that the economy will continue to its downward trend even as inflows into the building society savings accounts continued to grow. David Dooks, of the British Bankers' Association (BBA), said, "The consumer is more cautious than a year ago, with income growth having slowed, house prices having steadied and interest rates being up. In future we are likely to see much more subdued growth in personal borrowing, overdrafts and credit cards.
Consumer borrowing in April was noticeably weak, with a rare net monthly repayment of credit card borrowing."
| This fall in the borrowing is widely believed to be linked to higher interest rates and a sluggish housing market, which have made people concentrate more on repayments of outstanding loans. Net repayments for April stood at an impressive £40 million, the BBA said. Though this was just a ripple in the ocean of £34 billion outstanding debt, it still reflected that the consumer was conscious of the sluggish economy and wanted to make repayments when still able.
Citizens Advice, a consumer group, says, "Credit card problems account for the biggest single group of debtors; 20% of clients in serious debt are only there because they can't meet their credit card commitments."
Ross Walker, of Royal Bank of Scotland, said, “It suggests that there is a growing sense of caution out there, that consumers are perhaps not only slowing down the amount of new debt they are taking on, but beginning to repay some existing debt,. One would imagine that this is not a one-off — that we will see this sort of picture repeated in the coming months.” His views are increasingly being echoed around the market, which has seen a strong slump in recent times.
The BBA also said that mortgage borrowing had fallen for the first time in three years. It was £4bn last month - down from £4.5bn in March and the lowest since February 2002. "The weaker recent picture of mortgage demand continued in April, and tied in with other reported indicators of a slower housing market," Mr. Dooks commented. But there was some hope as CML Director General Michael Coogan, said, "We expect to see a continued soft landing as long as the Bank of England resists any new temptation to raise interest rates,"
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