Consumers continue to cut debts
1st April 2010
Cautious consumers continued to cut back on spending in February to work at reducing their debts, figures show.
Most are being careful not to take on new borrowing as the fragility of the country's exit from recession puts finances in the forefront of people's minds.
Net consumer credit - the amount the population borrows on credit cards, loans and overdrafts - remained broadly unchanged during the month once repayments were taken into account, the British Bankers' Association said.
Fears over rising unemployment levels could also be contributing to the unwillingness of consumers to splash out on new items using borrowed money, and could help explain a move by many to build up a "savings safety net" to help in the event of redundancy.
Income protection insurance, that pays out a monthly sum for up to a year if someone becomes unemployed, has also been rising in popularity in the downturn as people seek to protect themselves financially.
Borrowing through credit cards rose by £241 million, in line with the recent trend, while lending through loans and overdrafts contracted for the 15th month in a row, with consumers repaying £257 million more than they borrowed.
At the same time, people increased their savings levels by £4.3 billion, the highest level for more than a year and well up on both January's figure of £2.6 billion and the recent six-month average.
The group said subdued consumer spending had led to unsecured debt contracting by 1.7% during the past year, while personal deposit levels increased by 5.6%.
Copyright © Press Association 2010.
