Consumers are becoming less weary of credit, leading to an increase in demand for credit cards and home mortgages. A report from the British Banker’s Association is claiming that mortgage approvals, as well as credit card spending, are both on the rise.
While the increase in spending is good news for many consumer-driven businesses, the levels of borrowing are far from the dangerous dependence on credit observed during the credit bubble of 2006 and 2007. Lower interest rates have increased the level of borrowing from consumers, but only within a relatively safe margin.
Savers, on the other hand, are suffering from interest rates that are at their lowest point in several years. Economists have claimed that, while the current situation is far from the dangerous credit bubble of previous years, low interest rates and few incentives to save money could lead to a serious decline in savings.
The BBA report shows 42,990 mortgages for residential purchases were approved in September – an increase from the 38,834 mortgage applications approved in the previous month. The amount of mortgages approved in September is 7,000 higher than the six-month average, showing a significant increase in borrowing.
Despite the large increase in the number of borrowers, mortgage brokers claim that the level of confidence displayed by homebuyers is significantly lower than what we saw during the previous housing bubble. Consumers today tend to “play safe with credit” instead of borrowing to purchase property that’s beyond their means.
SPF Private Clients chief executive Mark Harris claims that borrowers are generally interested in “overpaying on their mortgages, taking advantage of low interest rates and paying down debt where they can.”
He believes that homeowners are reluctant to take on more borrowing while there is still uncertainty with regard the economic climate, despite growing confidence in the lending industry.