Shoppers dip into savings to cut debts
Consumers cut their debts at the fastest rate in two decades during December amid signs they dipped into savings to pay for Christmas.
Bank of England figures showed a net repayment of £377m in unsecured loans, the largest since records began in 1993 as analysts said consumers continued to lack the appetite to borrow amid concerns about the wider economy and jobs.
The figure reversed the £400m increase in consumer credit in November, which had been in line with the six-month average.
Credit card borrowing was flat for the third month in a row, despite the festive season.
Meanwhile, the Buildings Societies Association said consumers took out £100m of savings in December, indicating they used spare cash to help them over Christmas rather than taking on more debt.
BSA director-general Adrian Coles said: "It is clear that savers are still struggling to save as much as they would like, or are choosing to use spare cash to pay down debt instead. The fall in the rate of inflation may offer some breathing space to households but, if conditions in the labour market continue to deteriorate and wage growth remains low, household finances are likely to remain squeezed for some time to come."
The Bank of England figures showed that mortgage approvals rose to a two-year high in December, but analysts said the housing market remains weak compared with long-term norms.
The number of loan approvals for house purchase rose to 52,939 in December, the highest figure since December 2009.
But the upturn is slower than forecasters had been predicting, dampening hopes of any strong recovery in the near future.
Samuel Tombs, an economist at Capital Economics, described the latest figures as "disappointing" and said they showed the recent recovery in mortgage approvals had "ground to a near halt".