We're all borrowing more. Again.

29 February 2016

cashIt seems we’re all feeling confident and buoyant despite the doom and gloom mongering over the catchily monikered potential 'Brexit' we are all contemplating. Not to mention the disturbing prospect of a new US president named after a bodily function. New figures from the Bank of England show that we’re hungry to spend cash that’s not our own, with both mortgages and unsecured lending showing increases in January.

While the housing market has not yet recovered to pre-financial crisis levels, seasonally adjusted mortgage approvals for house purchase were 75,581 in January, up from a recent low of just 59,474 in November 2014. Pre-crisis we were looking at over 100,000 a month.

However, these figures may be misleading. New (draft) rules on Stamp Duty Land Tax (SDLT) will whack an extra 3% on second properties purchased after 1 April- which will particularly hit the buy-to-let market. As a result, people looking to purchase additional properties are rushing to get it all done in this first quarter of the year, and thereby possibly skewing the figures upwards. However, notwithstanding this timing issue, experts suggest that the availability of super-low mortgage rates (provided you’re not too old) are also likely to be having a positive effect on the number of mortgage applications.

But it’s not just bricks and mortar we’re spending on- comforted by the recently quoted impressive rises in house prices- as unsecured credit lending has also been rising rapidly over the past couple of years. We consumers are presumably thinking that we’re over the worst of it if we’ve emerged on the other side of the financial crisis (relatively) unscathed. But perhaps we have learned some lessons- most of the new unsecured credit is not being borrowed on credit cards. Annual growth on credit card lending was much lower than that of "other" unsecured lending, which mostly consists of loans to finance cars. Car loan borrowing grew by over 10%, the fastest rate for over ten years.

TOPICS:   Mortgages   Banking

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