Homeowners have gone on a borrowing binge as cheap re-mortgaging deals dry up.
Credit card debt went up by £350 million and bank loans and overdrafts soared by £2billion in February.
It was the highest monthly increase since records began in 1987, according to today's Bank of England figures.
City economists said the "bizarre" jump in consumer borrowing was caused by the re-mortgage "tap" being turned off by lenders because of the global financial crisis. Tracey North of uSwitch.com said: "People are grabbing what credit they can." Today several banks followed First Direct in scrapping their cheapest deals.
The figures show banks and building societies have drastically reined in their lending with mortgage approvals down 40 per cent in a year to 74,000 in February. It is the second lowest level since the Nineties housing crash. The level of mortgage equity withdrawal has also shrunk.
Instead of being able to spend the equity in their homes, hard-pressed families are having to seek more expensive forms of credit.
The fear is that once borrowers have exhausted all sources of credit, many will be forced into insolvency or have to give up their homes. A similar pattern was seen last year in America as the subprime credit crunch took hold. |
