Daily Mirror (Northern Ireland)
Debtors living on borrowed time... Lending to fall at fastest rate since 2008
BANKS have signalled the end of a cheap money free-for-all.
Firms are poised to rein in lending on credit cards and personal loans at the fastest rate since the start of the financial crisis in late 2008, a Bank of England report revealed.
The clampdown comes amid fears of a debt timebomb, fuelled by a decade of rock-bottom interest rates. Households owe more than £1.5trillion – £1.3tn of that on mortgages and £200billion on credit cards, car finance and other unsecured lending. However, the Bank of England’s Credit Conditions Survey found lenders are scaling back.
There was a net 13% fall in the availability of unsecured lending between July and September, the sharpest since late 2009. And the amount of credit on offer between now and December is set to tumble 28% – the biggest drop since the end of 2008.
The report cited lenders’ concerns about the economy and becoming more risk-averse. They’re also more cautious about mortgage lending.
A rise in the mortgage availability between July and September was entirely driven by loans to safer borrowers with big deposits. It comes as the number of borrowers struggling to repay their debts has crept up.
Yesterday’s survey found a slight increase in borrowers falling behind with credit card repayments, but a big rise in difficulties with other unsecured loans.
Banks also saw their losses on loans rise sharply in the past three months, the report found. Samuel Tombs, of Pantheon Macroeconomics, said consumer borrowing has fuelled the economy but “will increasingly become a drag”.
Mark Dyason, of Thistle Finance, said: “Not so long ago banks were lending left, right and centre at tantalising rates.
“Now they are turning the taps off with similar enthusiasm.
“Some might accuse them of mindblowing shortsightedness.”