Borrowing falls, house prices increase slightly

Posted in 'Personal Finance' by Richard Catlin

03 April 2009

Borrowing has fallen for the first time in 16 years. At long last we’ve collectively managed to make a dent in our debts as repayments exceed new borrowings. At the same time, lenders are making more encouraging noises about their willingness to open up more lending to consumers.

Overall unsecured consumer borrowing on personal loans and credit cards fell by £245m in February. This may have been caused by credit being harder to get and also by consumers being unwilling to take on more debt in the current recession. It’s a huge about-turn. Over the past ten years an average of £1.7bn a month has been added to our overall borrowings.

The Bank of England’s (BoE) latest Credit Conditions Survey found that the majority of lenders expect to increase their levels of lending in the next three months, rather than reduce it.

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As we reported in March, the first two months of the year saw mortgage lending increase to the highest levels since Easter 2008, (though still at very low levels), buoyed by a combination of low interest rates, an increased willingness to lend on the part of banks and (albeit slowly) stabilising house prices.

A further small boost came this week, after the Nationwide Building Society reported that average house prices increased unexpectedly by 0.9% in March, reaching £151,946.

There are always large regional variations in the average figures. You can check what average prices of different property types are in your own area, completely for free using our Check your Postcode service. This uses sales figures obtained directly from HM Land Registry – the actual prices paid for properties, rather than what they are offered at.

The news on both house prices and the increased optimism of lenders is certainly welcome. But it’s too early to assume that we’ve reached the bottom of the current recession. Indeed, the BoE survey also revealed that credit scoring criteria remains tighter across the board.

You can check how a typical lender would rate you by checking your own credit file online based on data from Equifax, or for the complete picture, get your report based on all three of the UK’s credit reference agencies here.