Unsecured borrowing takes a fall

After recent figures indicated that the level of secured borrowing had been rising in the UK, further figures have shown that the levels of unsecured borrowing in the UK have fallen quite dramatically.

The study was carried out by the Alliance and Leicester, and showed that credit card borrowing was growing at its slowest rate ever, and other forms of unsecured borrowing were at a twelve year low in terms of growth in 2006. Secured borrowing, on the other hand, has been thriving with many homeowners cashing in on rising equity levels in their homes.

"We have entered 2007 with a reduced appetite for borrowing and house buying since last summer," stated Chris Rhodes from the Alliance and Leicester. He also stated that the levels of borrowing in terms of mortgages and secured rates could soon start to see a drop due to three recent interest rate rises since August 2006 and the possibility of a fourth interest rates rise in the near future.

Figures have also indicated that the popularity of personal loans has waned as the result of the interest rate charges, with fewer people now expressing interest in personal finance. The managing director of moneysupermarket, Stuart Glendinning, said that the interest rates rises that have taken place recently have had a real impact on the number of people applying for unsecured loans.

According to Mr Glendinning the pressure of the recent interest rate rises has seen many lenders push their rate up above the six percent barrier, and with further interest rate rises expected he stated that he cannot see the rates of many lenders falling below this barrier again, leaving borrowers to put up with costly interest rates charged on their finance packages. He stated that despite the first couple of interest rate rises the interest rates "stubbornly stayed below six per cent." However, he added that the last rise was "the straw which broke the camel's back".

Tom Smith
17.02.07

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