According to recently released figures, over £11.5bn was spent on credit cards in the run-up to Christmas.
The figure for last year was just over £10 bn and takes the total overall credit card debt for consumers to almost £53 bn. Whilst spending on credit had risen, borrowing for mortgages had fallen, based on the same time last year by just short of £1 bn. This has led many commentators to predict a slower ride for the housing market in 2004.
Our View
The interest rate rise in November to 3.75% was mainly to try and slow the housing market. However, we believe the increase was only a tentative move by the Government and further increases are on their way.
One problem with having so much personal debt is the risks faced if it cannot be repaid, possibly resulting in bankruptcy. However, with all of the bad news for debts, the news is not generally picking up the fact that people are making greater repayments. Whilst the increased repayments might just be increased minimum payments on a larger balance, it seems that consumers are not actually falling behind with their debts
One word of warning though – if you only pay the minimum balance off each month you really should be looking for the lowest rate of interest possible. What people do not realise is that the added interest for the month can swallow up most of the minimum payment. This means that the actual money you borrowed by card or loan may stay the same.