Tightening Our Belts?

Early signs that Britons are starting to exercise greater financial control look set to continue in 2006, the British Bankers' Association said on Friday.

Lending figures compiled by the BBA for December showed personal loans fell more than expected as people became more reluctant to take on new debt.

New lending on personal loans and overdrafts totalled 2.5 billion pounds in December, a sharp decline on the previous six month's average of 2.99 billion.

"People are getting a lot more cautious about taking on borrowing and I can't see what would release those reins," BBA director of Statistics David Dooks told Reuters.

"Whilst there will be a bit of a comeback in January, I wouldn't expect to see it as high as previous years."

Dooks said December was never a great month for people taking out personal loans but last month's figures were weaker than previous years and reflected a general loss of appetite for borrowing that had taken place during the second half of 2005.

The reluctance to take on new debt has also begun to feed through to credit cards.

A survey of 2,000 adults for card provider Morgan Stanley showed they planned to spend 11 percent less on credit cards in the first quarter of 2006 than in the corresponding period last year.

"Following recent reports of a prudent festive period, our index shows we can also expect to see a drop in credit card spending over the next three months, particularly on luxury purchases," Morgan Stanley's Marketing Director Patrick Muir said in a statement.

The survey showed cardholders were planning to spend eight percent less on holidays and travel than in the first quarter last year and 20 percent less on their homes and cars

By Madeline Thomas
Reuters