Interest rates dampen borrowing
02 July 2004
Overall borrowing demand appears to be on the downturn, in response to higher interest rates and the likelihood of more to come.
The HSBC index for June, which measures new enquires for personal loans, mortgages and equity withdrawal revealed this current shift in borrowing.
Head of UK economics at HSBC, John Butler, said: "This provides possibly the first real evidence that the rate hikes to date are starting to dampen consumer confidence and curb people's appetite for consumer credit at least."
Additionally, the Index discovered that there is a current switch away from unsecured credit towards secured borrowing.
While the overall index, saw a drop in borrowing enquiries about secured products, equity withdrawal and mortgages, jumped by 25 per cent.
Enquiries about personal loans declined by 11 per cent.
The head of the bank's business economics team, Dennis Turner, added: "The huge gap between housing value and outstanding mortgage debt means that there remains enormous potential for further equity withdrawal which may continue to provide a substitute for short term debt."