The Bank of England has reported an increase in the demand for consumer credit on credit cards, overdrafts and loans, the first time that new borrowing has outstripped repayments since June.
Credit card borrowing pushed up the amount of unsecured consumer credit to £52m in December and over the Christmas period.
In the same period the number of home loan approvals fell slightly, although the number of approvals at 59,023 was still higher than the average over the past six months.
During the hard economic times it has tended to be the case that consumers have taken advantage of the low interest rates and repaid more of their debts than normal.
The change in trend has mainly been attributed to credit card spending, which was up by £195 million. Demand for loans and overdrafts has remained low and repayments on these still outstripped new borrowing by £143m.
Andrew Goodwin, of Ernst and Young, said that the VAT increase may have had some part to play: "The small increase in consumer credit is likely to be connected to consumers bringing forward purchases to avoid the VAT increase and a relapse is likely next month"
The Building Societies Association (BSA) agrees: "December is traditionally a slow month for savings as consumers make additional purchases for the Christmas period, and the return of VAT to 17.5% at the end of the year provided a further incentive to spend."
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