Personal borrowing soars in UK
Personal borrowing in the United Kingdom soared by its highest amount in more than five years in February, figures showed yesterday, as consumers rushed to raise what funds they can in the wake of the credit crisis.
But the Bank of England data also showed home mortgage approvals languishing near decade lows as banks toughen up their lending terms despite lower official interest rates.
The BoE said consumer credit rose nearly 2.4 billion pounds in February, up from a 0.9 billion pound rise in January and well over twice the amount analysts had expected.
Within that, banks' unsecured lending to consumers leaped by nearly 1.6 billion pounds, four times January's increase.
"Consumers are simply resorting to unsecured borrowing in their time of need," said Vicky Redwood, an economist at Capital Economics. "A similar pick-up in consumer credit was seen in the United States as its own slowdown gathered steam in the middle of 2007. Either way, a rise in unsecured borrowing out of desperation would hardly be a positive development."
Worries over what bad debt may be lurking on banks' balance sheets have driven up the rates at which banks lend money to each other, helping to raise the specter of a global economic downturn.
Those costs are now being passed on to customers through higher retail banking rates, making re-mortgaging less attractive and forcing consumers to seek other forms of finance.
Agencies
(China Daily 04/03/2008 page17)
