Unsecured Loans Hit 7 Month High

The Bank of England have just released fresh data showing unsecured loans were at a 7 month high in September.

A total of £208.6 Billion in borrowing through unsecured loans – loans not secured against property – an increase on £629 Million from August.

Believe it or not though, these figures are well down on previous years as Howard Archer, a chief economist with IHS Global Insight explained to the Guardian:

“Unsecured consumer credit remains extremely low compared to past levels and the indications are that consumer appetite for taking on new borrowing is still low, while there is also a strong desire of many consumers to reduce their debt.”

“Consumer desire to get a tighter grip on their finances is the consequence of current very low and falling consumer confidence, which reflects heightened concern over the outlook for the economy and jobs.”

He also believes the rise in unsecured loans showed more people were borrowing because their purchasing power has dropped due to job losses, low wage increases and growing inflation.

The data also showed approved mortgages fell in September although the value remained the same and remortgaging had seen a slight increase.

Meanwhile data released by the Office of National Statistics shows the poorer you are the more VAT you pay.

According to the Guardian article:

Its figures (Office of National Statistics) show that the poorest fifth of UK households spent a higher proportion of their outgoings on discretionary goods and services that attracted VAT in 2009/10 than in 1986.

Analysis shows that in 1986 the poorest fifth of households spent 55% of their weekly expenditure on non-VATable items, compared with 45% on VATable items. However, by 2001/02 this had reversed, with these households spending on average 42% on items which didn’t attract VAT compared with 58% on items which did. In 2009/10 the reversal was still evident, but to a slightly lesser extent, with the poorest households spending on average 45% of their total weekly expenditure on non-VATable items compared with 55% that did.

Overall, the data shows the poorest fifth of households pay more in VAT as a percentage of their disposable income than the richest fifth.

A 20% vat rate might not be such a big deal in a strong economy but the way things are at present surely it would make sense to drop it back down to 15%, at least until we are out of this recession?

Of course to do that the Government would have to admit they got it wrong in making the increase in one jump instead of spreading the increase over several years.

Source: Guardian