Consumers tipped to borrow more

Both the supply of and demand for credit will rise in the final quarter of this year, according to a new survey.

The prediction that cons…

Both the supply of and demand for credit will rise in the final quarter of this year, according to a new survey.

The prediction that consumers are likely to take on more borrowing and debt- both secured and unsecured – has emerged from the Bank of England's latest quarterly Credit Conditions Survey, based on the response of lenders between August 14thand September 4th.

It indicated that the supply of unsecured credit remained unchanged in the third quarter, but will rise in the months ahead, while levels of demand will also shift from being static to slightly higher.

This could mean more credit card debt and loans being taken on, some of which may be due to extra spending as Christmas approaches.

Consumers are also expected to take on more secured lending, which includes mortgages and hire purchases. The survey found there was a notable rise in the availability of this form of credit in the three months to early September.

Furthermore, the government's Funding for Lending Scheme is expected to help this to expand further in the next three months.

Allied to this was a slight increase in secured lending for house purchases and an anticipation of another small rise in the fourth quarter.

The latter factor may be good news in some ways because it suggests that efforts to revive the economy partly through getting the housing market going again may be successful.

But unless other aspects of the economy improve, those taking on new borrowing may be at risk, since continued recessionary conditions may leave those who are adding to their borrowing finding it hard to maintain payments if they lose their jobs.

Earlier this month, the Bank of England warned that economic recovery in Britain was far from certain.

In its minutes of the Monetary Policy Committee meeting for September, it noted there is a risk not just from the eurozone, but also from the slowing down of emerging economies in Asia and elsewhere.

By Joe White

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