Banks are seeing annual growth in credit card and personal loan borrowing for the first time in four years, in further evidence that households are starting to feel more confident.
Meanwhile, the number of mortgage approvals made to home buyers in August reached its highest level since 2009 as life returns to the housing market, the British Bankers’ Association (BBA) reported.
Credit card borrowing has grown by 6.7% over the past year, rising at a faster rate than that of personal loans and overdrafts at 5.1%. Consumers spent more on their credit cards than they paid back in August, in a break with a trend of more cautious behaviour which has often been seen in recent years of repaying more than they spent.
Some £8.4bn of new spending was recorded on credit cards last month, higher than the recent monthly average, while £8.3bn worth of repayments were also made.
Several studies have indicated that people are starting to feel better about the economy, including a report published by Lloyds Bank which found that consumer confidence has risen to its strongest levels in at least two-and-a-half years. The BBA’s report suggested that the increased demand for borrowing on credit cards, personal loans and overdrafts is also being boosted by “more competitive offers available” in the low interest rate environment.
Rachel Springall, spokeswoman for financial information website Moneyfacts, said: “It has become a more competitive market for credit as lenders fight to make their deals best buy worthy, by offering low interest rates. Existing customers would be wise to review their credit arrangements and see if they can move on to a better deal to take advantage of the low interest rates on offer.”
Card providers have been battling it out with long 0% introductory offers. Barclaycard is offering borrowers a 0% introductory rate on balances that are transferred over to it for 28 months, with a 2.99% transfer fee, according to Moneyfacts’ “best buy” tables.
The number of mortgage approvals made to home buyers rose to 38,228 in August, marking the highest figure seen since December 2009, according to the BBA’s figures. Approvals for remortgaging were also at their highest levels since October 2011, with 22,665 approvals recorded.
Lenders, estate agents and property websites have all been seeing a surge in housing market activity following the launch of Government schemes such as Funding for Lending and Help to Buy. Mortgage availability has sharply increased and lenders have been offering some of their lowest ever rates. The typical interest rate on new mortgages has fallen to a record low of 3.47%, according to recent figures from financial regulators.