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Credit card and loan debt surges while mortgage lending fell in June

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Written by: Paloma Kubiak
29/07/2016
Credit card and loan debt increased by £1.8bn in June, up 10% on a year ago, official Bank of England statistics show.

The sharp rise in June compares with the average monthly increase of £1.5bn over the previous six months.

Within this figure, credit card lending increased by £0.6bn in June, compared with the average of £0.4bn over the previous six months.

Other loans and advances increased by £1.3bn, compared with the average of £1.1bn over the same period.

The total amount of outstanding consumer debt (excluding student loans), which includes credit cards, other loans and advances, now stands at £186bn.

Jane Tully of the Money Advice Trust, the charity that runs National Debtline, said: “The continued surge in consumer credit is reinforcing our concern that some households risk being left exposed to financial difficulty, if the economy does indeed suffer in the wake of the EU referendum result.

“Most people are currently able to handle the extra borrowing they have taken on, but a minority are still struggling with the impact of the last decade’s squeeze on household incomes.  This extra borrowing could become even more difficult to repay if there is a halt to the UK’s economic recovery.

“Amid new economic uncertainty, it is now more important than ever that we are prepared for what could be a significant increase in demand for debt advice in the years ahead.”

Mortgages

Today’s money and credit figures also revealed that mortgage lending increased by £3.3bn in June (3.3% up from the previous year), compared with an average of £3.5bn over the previous six months.

Gross mortgage lending in June stood at £19.3bn with repayments totalling £15.9bn.

However, mortgage loan approvals were slightly down – 64,766, compared with the average of 69,998 in the previous six months.

The number of approvals for remortgaging were 43,102, up on the average 41,592.

Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA), said: “Caution was the watchword in June, as uncertainty in the run-up to Brexit rocked the housing market. Unsurprisingly, house purchase lending activity fell back, with many buyers choosing to wait out the vote and see if the result would land in their favour.

“Bucking the wider market trend, the remortgage market continued in fine form in June, with homeowners making the most of the competitive rates available and switching to better deals. Some of these remortgagers will be landlords looking to counteract the added tax burdens handed to them in recent month from the Stamp Duty Land Tax reforms, changes to the wear and tear allowance, and the upcoming squeeze on interest relief. Others will be homeowners looking for a boost to their finances while wage increases remain lacklustre.”

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