UK Unsecured borrowing surges by £2.4bn in February

Posted on 4 April 2008 by Katie Tucker

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Figures for February show that unsecured lending has soared by £2.4bn, (January's increase was £0.9bn).  To put this into perspective, this is 215percent more than last February.

What does this mean? Unfortunately, it is as we have been saying all along, the credit cards and loans that have been racking up as people coped with their mortgage payments, were going to take their toll, and some of this will be people consolidating their debts. Consolidating debt can be a useful tool, if you are moving debt from a high interest rate (like credit cards) to a lower interest rate, but only if the new loan is arranged on a short enough term that the interest for all that debt over the term does not go up.  To make sure consolidating isn’t doing you harm in the long run, work out what your interest over the term on all your debts would have been, and compare them to the interest over the term of your new loan… or ask an advisor to work it out.

Another even more frightening part of this £2.4bn surge, is all the people coming off 100% mortgages who had to take a few thousand on a personal loan, at around 10% interest rate, to bring their mortgage down to 90% or 95% to remortgage. Ouch.

Many homeowners are going to make the hard choice this year: given the cost of the loans and the remortgage rates, many will sell up.

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