Credit Card Spending Affected by Stagnant UK House Prices

Some experts claim that UK credit card spending is slowing down and may decline further due to reports in May from HBOS plc that house prices fell by 0.6% and predict the prices of our homes would fall an average of 2% this year. Nationwide Building Society, however, have reported a rise in house prices by 0.3%.

Also this has been a sluggish month for companies lending on credit cards. It has been the lowest monthly rise in lending since June 2001 and a difference of just over #300 million since March.

These conflicting reports are a definite indicator that the housing market is stagnating. If the housing market stagnates or interest rates rise we as the consumer are going to lose confidence in their spending power. We will stop spending, we will stop obtaining credit cards and we will be left with outstanding credit debts, large over draughts and huge bills to pay. Today we are more likely to miss a repayment and have balances outstanding than ever before with consumers becoming increasingly casual in their payment methods. UK credit card companies are already aware of this growing debt burden that at some point in the future they may have to recoup the losses incurred by these bad debtors and good customers will have to foot the bill. Some go so far as to say that there may be no 0% balance transfer deals available within 12 months. This could spell the end of the infamous rate tarts that roll their debt over without paying any interest. This policy is astute if you can afford to pay off your UK credit card balance but foolish if you expect to repeatedly do this with no plan of paying your bill.

We will have to wait and see if the Bank of England increases or decreases interest rates which are sitting at 4.75%. The bankers and economists of the city predict a fall is imminent to boost consumer spending on the high street. This would also help confidence in the housing market and within 6 months prices will be on the increase again.

If you are one of the many consumers that have high credit card debt then you may be looking towards a 0% balance transfer to a low interest credit card before companies put a stop to offering such deals. If you feel you are struggling to keep up with repayments then I would recommend you seek a reputable financial advisor who would be able to give you the correct information to help you.

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