Latest household finance update statistics from UK Finance, show that £11.4 billion was spent on credit cards in April 2019 this was 11.7 per cent higher than the same month in 2018, This growth in spending reflects consumers’ increased preference for using credit cards as a means of payment, particularly online, because of purchase protection and card benefits. Repayments have remained in line with credit card spending, showing overall that consumers are managing their finances effectively.
Personal borrowing through loans in April 2019 was 7.8 per cent higher than the same month a year ago (see chart 5). Lending through overdrafts in April 2019 was 0.9 per cent higher compared to same month last year.
The statistics also show that gross mortgage lending across the residential market in April 2019 was £20.3 billion, some 1.4 per cent lower than the same month in 2018. Whilst the number of mortgages approved by the main high street banks in April 2019 was 5.4 per cent higher than the same month in 2018; approvals for home purchase were 8.6 per cent higher, remortgage approvals were 2.2 per cent higher and approvals for other secured borrowing were 0.8 per cent higher (see chart 3).
Responding to the figures Mark Pilling, MD at Spicerhaart Corporate Sales said “The latest stats from UK Finance reveal that mortgage lending is down 3.6%, but all other forms of household debt have risen, with credit card spending up 11.7%, the amount outstanding on overdrafts up 0.9% and the value of new personal loans are up 7.8%.”
“Earlier this month, the Money Charity stats also revealed a worrying picture in terms of household finances. It revealed that the average real wage is down 5.3% since the pre-crash peak in February 2008, that credit card debt is now £2,638 per household as people start having to put everyday expenses onto credit cards.”
“Last week, we saw the real impact of these tightening household budgets on the High Street as another ‘casual dining’ business – Jamie’s Italian – went into administration. Add this to the ongoing Brexit saga, which is affecting consumer and business confidence, and we have a perfect storm.”
“Troubles in the retail and casual dining sector and rising debt have always been a sign of what is to come, and these figures today also paint a worrying picture. In Q1, mortgage arrears and repossessions rose for the first time in years, and I think we will see a more significant rise at the end of Q2.”
Richard Pike, Phoebus Software sales and Marketing Director, said“The correlation between the gross mortgage lending figures, which were down, and the number of approvals, which were up across the board, is quite telling. As house prices fall, especially in London and the south east, and house buyers also look farther afield into more affordable areas, this gap is only likely to widen. It is, however, encouraging to see the increase in approvals for home purchase, which does show that people have had enough of sitting on their hands and are making their move.”
“The level of unsecured lending has been rising consistently over the last few months. This does give cause for concern as it perhaps shows that there are a great many people living on credit to meet their basic needs. This type of credit is more easily attainable and, without security, does put more vulnerable borrowers as risk.”
“As the latest inflation figures went over the 2% target set by the government there have been questions as to whether the Bank of England will consider an interest rate rise. However, it is probably a little early to think that. There are many factors and, given the latest upheaval in Westminister, there is a lot of dust that needs to settle before that particular decision has to be made. So in the meantime, those that have had enough of standing still will benefit from the continued low-interest environment.”