Consumer borrowing holds firm

Consumer borrowing has held firm in May, thanks to increased demand for secured lending.

16:01 26 May 2004

Consumer borrowing has held firm in May, thanks to increased demand for secured lending.

HSBC has said that there was a slight weakening consumer interest in unsecured debt at the same time.

The bank's Household Sector Borrowing Confidence Index, which measures new enquires for personal loans, mortgages, and equity withdrawal, found that borrowing may be steadying after several months of strong growth.

But the pattern of a strengthening demand for secured borrowing combined with a slight weakening in interest in unsecured debt remained in place.

Dennis Turner, HSBC head of business economics team, said: "The index reveals that it is secured borrowing which is leading the way, suggesting that the recent sparkle in the housing market is unlikely to dim for some time yet."

The index also found "no indication" that the interest rate rise at the start of May had any significant effect on customer borrowing activity.

John Butler, HSBC UK economist said: "There is no clear evidence as yet that the higher interest rate is helping to cool households' appetite for debt."

"That quite simply means that rates have further to rise."

Inquiries about secured products, equity withdrawal and, particularly, mortgages stayed well above last year's levels and although enquiries about personal loans were down on May 2003, the level of interest remained high.