Credit card debt overtaken by secured borrowing

Recent data has shown that credit card spending in the UK has been overtaken with secured borrowing, with more and more people opting to borrow money secured against their homes in order to enjoy lower interest rates than on costly credit cards where the interest rates can be extortionate.

The figures from the British Bankers' Association arrives light of information that confirms that credit card spending has been falling recently. It also confirms recent reports that the popularity of secured borrowing has risen as people have found themselves with rising levels of equity in their properties.

Recent increases in borrowing seem to have made UK consumer more savvy when it comes to borrowing money, and many have worked out that it is far cheaper to take out a secured loan at a lower rate than to continue spending on credit cards on an unsecured basis, where high interest rates and additional charges are applied. According to the figures credit card borrowing has fallen by around half a billion pounds in January.

David Dooks from the British Bankers' Association stated: "We can see that the January sales did not encourage borrowing on credit cards. As in the second half of last year, card borrowing is contracting, and with weaker retail sales being reported this reflects the consumer’s current attitude to spending and their commitments."

He also added: "Mortgage lending continued to be buoyant, as we expected following the high volumes of approvals in the final quarter of last year."

Due to a number of recent interest rate rises enforced by the Bank of England homeowners that do plan to cut back on credit card spending and instead turn to secured borrowing are advised to shop around in order to find the most competitive rate in order to enjoy affordable repayments and low interest rates on their borrowing.

Tom Smith
26th February 2007

• Mastercard
• Visa