Record low interest rates are helping to fuel a strong demand for personal loans and credit cards, as consumer credit grows at its fastest levels in nearly a decade, banks have reported.
The British Bankers’ Association (BBA) said consumer credit grew by 6% annually in September, as people increasingly use short-term borrowing to take advantage of ‘cheap money’.
The trend has accelerated since the Bank of England recently cut the base rate to 0.25%, making the cost of borrowing even cheaper, the BBA’s High Street Banking report said.
Meanwhile, 38,252 mortgage approvals were made to buyers in September - marking a small increase compared with August - but 15% lower compared with September 2015.
The BBA said this year so far, the number of mortgage approvals is running 3% lower than in the same period of 2015.
With low interest rates making mortgage deals attractive, the number of home owners re-mortgaging has held up compared with a year ago. The BBA said 24,841 remortgage loans were given the go-ahead in September, a broadly similar number to the 24,880 deals seen in September 2015.
The number of re-mortgage approvals this year so far is running 15% higher than the same period in 2015.
Net borrowing by non-financial businesses fell back by £312million in September, following a fall of £104m in August.
Rebecca Harding, the BBA’s chief economist, said: “Consumer credit is growing at its fastest rate since December 2006, driven by strong demand for personal loans and credit cards.”