Debt Burden Stats Are Optimistic
The Bank of England's figures report that the total UK personal debt at the end of November 2007 was £1.4 trillion, a 9.5% increase over the previous year. Credit borrowing, both on credit cards and unsecured personal loans, increased by 5.7% to £223bn while outstanding mortgage debt climbed more than a tenth to £1.17trn. Savings fell from 4% to 3.4%.
This is good news, as it shows strong growth while most other economies declined. The released data from the Office for National Statistics showed a continued economic growth of 0.6 per cent in the last three months of 2007. This is lower than the 0.7 per cent in the third quarter of 2007, but much higher than the forecasts for 0.5%.
Economists point out that higher oil prices will increase petrol bills, and household utility bills are also increasing. "The Bank has a very fine balancing act to perform - it must consider the consequences for inflation of cutting interest rates now, which may mean borrowing costs are eased by less than the market expects in 2008," says George Buckley, chief UK economist at Deutsche Bank.
This increase will offset the decrease in the housing market. At this time few economists are willing to make predictions on whether the inflation rate will increase.
Despite several economists' forecasts claiming the Bank will lower interest rates early in 2008, the interest rate remains at 5.5%.
The minutes from the last Monetary Policy Committee (MPC) meeting did little to ease consumer's minds. Only one member, David Blanchflower, voted against the move, and voted to cut rates 0.25 percentage points.
Gross mortgage lending dropped to £22.6 billion in December, 25% lower than November's lending volumes, according to data from the London-based Council for Mortgage Lenders.
Consumer debt remains basically unchanged from last year's record levels, mortgage lending climbed, and consumer spending on credit cards climbed. All together, these point to a 'soft landing' for the UK economy in the coming months.
Published on January 31, 2008
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