Higher debt causing people ‘to improve finances’

People are trying to improve the state of their finances as a result of increased levels of debt, one expert has suggested.

Howard Archer, IHS Global Insight’s chief UK economist, was quoted by the Times as indicating this could be one of the reasons why Britons have pumped so much money into trying to reduce their mortgages over the last year.

The Bank of England revealed this week that for the fifth quarter in a row consumers chose to pay down mortgage debt instead of borrowing further against their houses.

Mr Archer commented: “It is clear that many people are keen to improve their personal balance sheets given higher debt levels and the worrying economic situation.”

He also said that paying extra on mortgages is more attractive as a result of low savings rates.

The Council of Mortgage Lenders also commented on figures from the Bank this week, with economist Paul Samter welcoming the first decrease in default rates on mortgages for two years.

By Chris Trimble

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