Personal Loans on the rise once more as borrowing picks up to Pre-Recession levels ñ Is consumer confidence at a 7 year high?
Gross borrowing via personal loans has increased every month this year marking an end to years of decline in the number of unsecured loans taken out by savers conscious of a turbulent economic climate, according to the British Bankers Association (BBA).
The BBA noted that personal loans have not been this plentiful since pre-recession levels, with its data showing £175m total in personal loans and £346m spent via credit cards. This marks a 2.6% increase over the last year ñ the first increase in personal, unsecured loans taken out since 2007.
Enhanced numbers of personal loans being taken out indicates the publicís confidence is growing with regard to their financial stability, as these loans are typically used to fund somewhat ëbig ticketí purchases such as home renovations and luxury holidays. It is as simple as this - when borrowing increases across the board, customers are generally more at ease with the long-term viability of their financial situation.
David Dooks, statistics director at the BBA, said: ìWhen customers feel more optimistic about the economic outlook they are much more likely to take on new borrowing.
ìBut I was particularly struck that after years of decline demand for unsecured personal loans is rising quite strongly again.
ìThose products are often used to finance bigger purchase such as cars or major home improvements ñ the sort of spending we often put off until we feel confident about our financial circumstances.î
Mortgage Approvals on the Wane
Elsewhere, the housing market has shown signs of cooling significantly, as only 41,588 mortgages worth a collective £6.7bn were approved by lenders in August ñ a 3% drop on the previous month. This marks the lowest monthly rate of approvals this year, falling short of the government minimum target of 42000. Despite, mortgage lending being up by 15% on the previous year and house purchase approvals also up from 2013, yearly increases in mortgages are moving at a slower rate potentially as a result of stricter lending rules tempering housing market activity.
As such, the BBAís data suggests demand for housing has begun to alleviate, and with escalating house prices, affordability checks by lenders and other measures enacted by the Bank of England to curtail reckless lending, this could very well be the case. Moreover, the Royal Institution of Chartered Surveyors (Rics) expressed their belief that house price inflation is on the wane, with plateauing expected next year.
However, there are those who believe a stabilising economy combined with an improved supply of affordable housing will be enough to lure buyers back into the market.
ìWith no structural impediment to lending evident, we expect mortgage lending will recover before the end of the year, as the improving economic situation and a rise in the number of homes for sale tempts buyers into the market,î said Matthew Pointon, a property economist at Capital Economics.
Brian Murphy, Head of Lending at Mortgage Advice Bureau (MAB), said: "Healthy competition between lenders means that consumers can take advantage of preferential rates, while MAB data shows that more than 12,000 products were available on the market in August: a post-credit crunch record high for consumer choice.
ìWhile the remortgage market has not yet seen the same level of recovery as purchase loans ñ with overall remortgaging levels down on last year ñ we can expect to see activity increase as interest rate rises edge closer, making locking into a low rate deal at the top of consumersí priorities.
"Although as many as three million consumers have been unable to remortgage due to low equity or worsened financial circumstances, rising house prices and improved employment prospects should also return many of these ësilent prisonersí back to the remortgage market.î
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