Outstanding debt on consumer overdrafts and personal loans is at a ten year low according to the British Bankers’ Association (BBA).
Standing at only £52bn, outstanding consumer debt is indicative of the slow recovery in the economy and fall in consumer confidence. The figures show that consumers are relying more on existing funds such as savings to pay their bills.
Figures have shown that the high rate of inflation and rise in energy prices has meant people were saving less in June, the figures for July show a slight increase in personal deposits and savings with high street banks.
According to the BBA figures however, savings for the first seven months of this year only increased by £8.6bn, as opposed to £16.3bn in the same period last year. Meanwhile repayments of personal debt were once again higher than lending leading to the lowest lending figures in ten years. One of the best forms of saving is that for your retirement, so ensure you have a retirement income that can stand up to high rates of inflation such as we have now.
The same trend can be seen in the corporate sector as well. Businesses debt repayments are higher than new lending. The BBA’s statistics director, David Dooks said: “Overall companies’ appetite for finance remains low, reflecting business decisions in difficult trading conditions – new finance made available to one company is simply being offset by debt repayment from another”.
Regardless of low interest rates, consumers have also been reticent to take out new mortgages. Although there has been a slight increase in the number of mortgages approved in July, the overall figures are still quite low. Brian Murphy of the Mortgage Advice Bureau said: “”The problem does not lie with the lending environment, which is highly attractive at the moment. The problem lies with consumers feeling the financial pinch.”