Bank fears bor­row­ing binge

Daily Mail - - City & Finance -

HOUSE­HOLDS are binge­ing on cheap credit cards and per­sonal loans at the fastest rate since be­fore the fi­nan­cial cri­sis, ac­cord­ing to the Bank of Eng­land.

The fig­ures pro­vide am­mu­ni­tion for the Bank, which is ex­pected to un­veil a crack­down to­day on risky lend­ing, in­clud­ing buy-to-let mort­gages.

The cen­tral bank is wor­ried that house­hold debt is ris­ing too fast, as fam­i­lies take ad­van­tage of a glut of cheap money.

The amount owed on per­sonal loans and credit cards rose by 8.2pc – or £1.2bn – in the year to oc­to­ber to £177bn, ac­cord­ing to its lat­est fig­ures.

This is the big­gest in­crease since 2006, be­fore the fi­nan­cial cri­sis, and repeats the 8.2pc surge in the year to Septem­ber. Mort­gage ap­provals jumped to 69,630 from 69,012 in Septem­ber – driven by a growth in the buy-to-let lend­ing mar­ket. The Bank’s Fi­nan­cial Pol­icy Com­mit­tee is ex­pected to an­nounce mea­sures to rein in risky lend­ing. This may in­clude ac­ti­vat­ing the so-called ‘counter cycli­cal buf­fer’, which forces banks to set aside more cap­i­tal in the good times to cover losses in the bad times.

Ex­perts have warned such a move would prompt banks to hike in­ter­est rates on loans as they pass in­creased costs on to cus­tomers.

The Bank will to­day also pub­lish the re­sults of ‘stress tests’ which gauge whether the UK’s big­gest banks have enough cap­i­tal to with­stand another fi­nan­cial cri­sis.

The Bank and the Trea­sury said their Fund­ing for Lend­ing Scheme to en­cour­age banks to lend more to small busi­nesses has been ex­tended by two years un­til Jan­uary 2018.

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