UK Credit Card Debt Falls as Mortgage Borrowing Rises

New figures released by the British Bankers Association (BBA) and the Building Societies Association reveal that last year UK consumers repaid almost £2billion in credit card debt. However, whilst last year saw Brits paying off a substantial amount of their credit card debt, borrowing on mortgages rose to an unprecedented level.

The increase on borrowing on mortgages has been partly attributed to increased house prices, more people moving home and homeowners trying to offset rising interest rates. However, the figures show that UK consumers ended 2006 with a reduction of £1.8billion on credit card debt.

BBA director of statistics, David Cooks, said: "2006 was notable for contrasting trends in secured and unsecured personal lending.

"Whilst mortgage demand remained robust, despite the housing market experiencing seven per cent annual inflation and an expectation of rising interest rates throughout the second half of the year, the appetite for consumer credit waned, as reflected by the significant contraction in credit and borrowing."

Brits increased their mortgage borrowing by £66.8billkion, a rise of 20 per cent on 2005, according to BBA figures. Loans and overdraft increased by £4.2billion, an increase that was 15 per cent smaller than 2005's increase.

BSA director general, Adrian Coles, said: "Building society mortgage gross lending hot £52.8billion in 2006, which is the highest yearly figure on record."

However, it appears Brits appetites for borrowing may be waning.

Mr Coles added: "It takes some months for the mortgage market to adjust to a rate rise, but these figures suggest that last year's rises were starting to take effect. Net mortgage lending from building societies has declined from recent highs in the past few months and December was down year on year by 32.3 per cent.

" Approvals (loans agreed but not made) are down from the highs seen earlier in 2006 – but still are a December record. This suggests mortgage lending will continue to be robust at the start of 2007."

Alisdair Milton
24th January 2007

More Information:

• Causes and Cures Of Credit Card Debt
  For some, credit cards can prove a temptation too far, and soon they find themselves in debt. Simple precautions will keep the savvy card holder from such dangers.
• Debt Management and Consolidation
  These days, credit is so easy to get access to, is very easy to simply take on more than you can handle and let it get out of control very quickly.
• Consolidating Your Debt On A Credit Card Can Be Wise Financial Management
  We’re continually being told that the UK is a nation of debt junkies and that we’re all one step away from bankruptcy. We’re also continually being told that most of our unmanageable debt is credit card debt –the worst form of debt you can have as it pays the highest rate of interest and fees.
• Tips Getting The Best Mortgage Deal
  Buying a property is likely to be the largest purchase you ever make – finding the right deal for you means choosing one mortgage from the many hundreds available. This will be much easier if you know what you’re looking for.

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