Level of Consumer Debt Doubles

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Figures released by the Bank of England have revealed that unsecured consumer debt doubled in May.
The figures reveal that the amount of debt, which was primarily loans and overdrafts, rose from £379 million in April to £732 million in May.
The May figure is the second largest amount since April 2011, March 2012 being the highest. Economists have argued, however, that it the figure is still below the average monthly level of £1.1 billion in unsecured consumer credit seen since 1993.

May witnessed a net increase of £603 million in other loans and advances which was the largest since December 2010. This was a rise from £439 million in April.

However, consumers continue to be careful with their credit cards. In May, Bank of England figures showed that there was modest net borrowing of £70m on credit cards after a net repayment of £60m in April.

Howard Archer at Global Insight said:

“The appreciable pick up in unsecured consumer credit in May is a surprise but it may have been affected by some people having to borrow more as a consequence of the extended squeeze on their purchasing power.”

“Latest data from the Office for National Statistics show that households’ real disposable income fell 0.9pc quarter-on-quarter in the first quarter of 2012 after a similar drop in the fourth quarter of 2011.”

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