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Consumers more cautious about credit advances

Consumer credit advances fell by 7% during March as people remained cautious about taking on more debt, figures have shown.

A total of £4.84bn was advanced in unsecured lending and second charge mortgages during the month, 7% less than during the same month of 2010, according to the Finance & Leasing Association (FLA).

The drop in lending was driven by lower levels of consumer spending as concerns about the economic outlook and hikes in the cost of living caused people to tighten their belts.

Store installment credit, dived by 28% year-on-year, despite this type of borrowing previously holding up better than other areas during the economic downturn.

There was also a 21% drop in spending on store cards, while the amount of money people borrowed on credit cards fell by 8%, although at a total of £2.53bn it remained the largest area of lending.

There was a drop in the number of people taking out unsecured loans, with borrowing through these dropping by 15% to £182m, while second charge mortgages, which enable people to borrow money secured against their home, were 11% down year-on-year.

Car finance was the only area of lending which did not suffer a reduction, with advances remaining broadly unchanged compared with March 2010 at £1.72bn.

Fiona Hoyle, FLA head of consumer finance, said: "Our figures accord with a number of recent surveys showing that consumer confidence in the economy remains low."