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
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• Debt Management and Consolidation
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• Consolidating Your Debt On A Credit Card Can Be Wise Financial Management
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• Tips Getting The Best Mortgage Deal
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