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SERVICES 
Thursday, 29 November, 2001, 12:57 GMT
UK consumers keep borrowing
Credit card
The service sector has seen a fall in credit card use
British consumers have continued to shrug off fears of an economic slowdown, with new figures showing the level of borrowing continuing to grow.

Latest data from the Bank of England shows that lending grew by 6.5bn during October, and has risen by more than 10% over the past year.

Mortgage lending remained strong, suggesting people are being encouraged to keep investing in property by the current low levels of interest rates.

"There's certainly no indication at this stage that consumers' appetite for debt is in any way diminishing," said Simon Rubinsohn, chief economist at stockbroker Gerrard.

"Consumers are still the key driver of the economy and the key factor stopping the economy slipping into recession."

Housing market maintains strength

Of the 6.5bn increase in total lending last month, 5bn came from mortgages, showing that UK house buyers are remaining resilient, despite recent data suggesting house prices may have peaked in some parts of the country.

The Bank's figures showed that the number of loans approved for house purchase in October was 110,000, similar to the average of 109,000 in the three months to September.

Consumer credit - including things such as loans, overdrafts and credit card borrowing - grew by 1.5bn last month, and has risen by 12.9% since the same period last year.

Services suffer

While overall lending still seems to be buoyant, a different survey suggests that some parts of the economy may be suffering from people beginning to tighten their belts.

New figures from the Credit Card Research Group (CCRG) show that credit and debit card spending has remained resilient in High Street shops, rising 0.1% in October on the previous month's figure.

But the CCRG's figures found a fall of 8.1% in plastic spending on services, with the travel sector being hit especially hard following September's terrorist attacks.

Overall it meant expenditure on plastic fell in October by 3.1%, compared to September's figure.

Despite the drop, the group said such a fall was not unusual at this time of year.

"The CCRG is still expecting sound growth in spending in the run-up to Christmas and consumers are likely to put more than ever on plastic," said the CCRG's director Steve Round.

"However, the service spending data seems to confirm that the fall-out from the September 11 attacks will be felt for a long time to come."

See also:

05 Sep 01 | Business
1.2bn personal debt crisis
30 Aug 01 | UK
Stretched to the limit
30 Jul 01 | Business
Q&A: How to manage debt
25 Jul 01 | Business
Crackdown on rogue lenders
26 Jan 01 | Archive
Caught in the debt trap
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