Research conducted by Alliance and Leicester also concludes that the growth in consumer borrowing is trailing behind the growth of earnings, currently at 4.2%, and the growth of inflation of 2.4%. Furthermore, credit card borrowing has substantially dropped, with the longest series of monthly falls from February to August in this current year. This marks the first annual decline in credit card borrowing.
More consumers are conforming to this current trend and intend to further reduce their borrowing. The survey reports that those intending to reduce their credit card debt over the next six months outnumber those who wanted to borrow more on their cards by a factor of five to one.
Findings indicate that those with mortgages are more inclined to reduce their debt than any other group.
2006 has been a turning point for the UK consumer. People are now seeing their unsecured borrowing fall relative to their earnings, said Chris Rhodes, managing director of Alliance & Leicester retail banking. We have not seen consumer borrowing this subdued since the recession of the early 1990s. The good news is that this time the economy is performing well and employment is at an historic high.
Other unsecured borrowing has also declined. With the continuance of this current trend, unsecured borrowings will be down to GBP11 billion less than if it were to conform to the trend of the past 10 years.
