Figures from the Bank of England have shown that there was a record drop in borrowing levels for the month of December, with consumers reducing their borrowing on personal unsecured loans as well as on other types of finances such as hire purchase and overdrafts. The level of non mortgage related borrowing is said to have fallen by the steepest level on record according to the data, falling by £377 million.
The Bank of England said that the fall in borrowing on finance such as loans and overdrafts helped to drive the drop in borrowing levels. The figures showed that in December the amount that was outstanding on credit cards remained the same. Officials believe that the figures show how more and more consumers are shying away from debt due to the uncertain financial climate and the problems in the employment market.
With the financial climate in its current state, where soaring living costs and frozen pay is leading to overstretched budgets and severe financial difficulties for households, many are going to extreme lengths to avoid having to borrow money, which has resulted in the steep drop in borrowing over the month of December. For many, the thought of getting into more debt at such a financially fragile time is one that is quite daunting and therefore most have been reining in their spending and avoiding debt as much as possible.
One economist, Howard Archer from Global Insight, stated: “Consumer desire to get a tight grip on their finances is clearly the consequence of current heightened concerns over the outlook for the economy and jobs.”
In the meantime, the Building Societies Association said that over the course of lat year activity in the property market had remained weak with the number of transactions coming close to an all time low for the year.