Credit spree as home loans tumble

The Bank of England yesterday reported that although there is a general gloom and fear over a property market collapse credit card spending has reached a high of £12.36 billion last month with consumers owing close to £180 billion.

It has been suggested that first time buyers who are being priced out of the market are now going on shopping sprees using their credit cards to spend money they had saved.

Economists generally believe consumer spending is tied closely to house prices. Shoppers are supposed to feel more affluent when the price of their house is rising and they need to buy more white goods and furnishings when they are moving home.
"If we are borrowing a bit less on houses then we feel more comfortable about going out and buying a new hi-fi or a flat screen television," said Ross Walker, an economist at the Royal Bank of Scotland.

The Bank of England has raised borrowing costs five times to 4.75 per cent since November.

Bellway the house builder has made an effort to lure first time buyers by offering homes at on 75% of their value with the remaining 25% due when the house is sold or re-mortgaged.