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Monday, February 1, 2010

Neither a lender nor a borrower be?

Lending to individuals is on the up

Statistics released today by the Bank of England show that lending to individuals (rather than businesses) increased in December amid signs that the credit crunch is easing. Total net lending to individuals rose by £1.2 billion in December whilst the twelve-month growth rate remained at 0.7%. The net lending secured on dwellings increased by £1.2 billion, meaning that secured lenders are willing to increase their exposure to the UK property market. This optimism seems to be backed up by figures from the Land Registry showing that UK house prices rose by 0.1% in the month of December and went up by 2.5% overall in 2009.

Whilst net lending secured on property has been increasing over the past few months, December saw the first net increase in unsecured lending for six months, with an overall increase of £0.1 billion.

Needless to say, different people will read different things into these figures. On the one hand, evidence that lenders are freeing up credit and making it easier to borrow money may be regarded as positive signs that the credit crunch has come to an end. On the other hand, the impact of over-indebtedness has become an increasingly important socio-economic issue and the national addiction to credit seems to be here to stay.
If banks keep lending without real regard for their customers' ability to repay, they will surely come unstuck again. And if individuals don't take responsibility for their credit habits, they will find themselves in deep trouble. Further regulation of consumer banking may help, but more financial education for individuals is sorely needed.

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