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Consumers 'Feeling Comfortable With Their Borrowing'

Oct 29, 2007
Britons are becoming increasingly financially confident, new figures show.

In CreditExpert's latest Personal Credit Index the nation's financial optimism has risen by two points over the last three months to stand at 98. Despite this surge, the online credit report company pointed out this is still below the 100 recorded in April. The study suggested this positive outlook is due to more people feeling financially secure after completing making repayments for their summer holiday and with the spending pressures that come in the run-up to Christmas yet to take effect.

In addition, the findings also indicated that more than three-quarters (76 per cent) of those with credit cards and loans now feel comfortable with their level of debt - a rise of two percentage points from the previous study. Overall, 53 per cent of consumers across all types of borrowing are at ease with how much they are in the red by. Once again this figure is a two percentage point increase from the company's earlier research.

A drive surge in financial confidence was noted throughout Britain, with optimism in London and the Midlands rising by ten and five points to reach 96 and 105 respectively. However, the sole exception was the north of England where the index decreased by three points from July figures to stand at 97. According to the company this fall could have been driven by the collapse of the sub-prime mortgage sector, which was suggested as having a greater impact upon this particular region than any other in the country.

Research from the firm also revealed there is a slowing in the uptake of borrowing, which could well incorporate areas such as personal loans and credit cards. The latest figures show that 13 per cent of consumers have upped the amount of money borrowed over the past six months. However, in CreditExpert's July index growth of 16 per cent was posted.

In spite of swelling confidence, CreditExpert reported millions of homeowners could be coming under unexpected financial pressure. The announcement comes as, when asked what the impact of a 0.5 per cent base rate rise by the Bank of England would have on their monthly payments for a 100,000 pounds interest-only mortgage, 70 per cent of respondents answered incorrectly.

According to the firm, about a fifth of people surveyed state that this increase will hike mortgage costs by at least 80 pounds, although the actual move would stand at about 40 pounds. Difficulties in paying back mortgages, personal loans and other constraints on spending may be more evident for the 17 per cent who believe such an increase will see their monthly payments rise by no more than 10 pounds.

Meanwhile, more than three-quarters of consumers are unaware as to what the term annual percentage rate (APR) means. About half of those surveyed believe it is solely the interest rate payable on borrowing. However, the true definition of APR is the interest rate and the cost of a loan.

Commenting on figures, Jim Hodgkins, managing director of CreditExpert, said: "Although the current Personal Credit Index shows that people generally are more confident than in the last quarter, the lack of understanding of key terms and the effect of interest rate changes is worrying. It's important for people to be familiar with standard financial terms and stay on top of changes that affect their personal finances so they can make the best possible decisions and choices."

In addition, Credit Expert stated that the financial strain that the forthcoming festive period brings as well as predictions that the Bank could change the base rate may cause the nation's financial confidence to dip as they may develop difficulties making repayments on various forms of borrowing such as loans and overdrafts.

As a result, those people who are concerned about future hardship their finances may come under might well wish to think about applying for a debt consolidation loan. Taking out such a form of borrowing could see them with more disposable income left at the end of each month, extra money which could prove useful in the run-up to Christmas. Earlier this month, Martin Lewis from MoneySavingExpert reported that although the festive period often sees many people struggle to handle their money, consumers can avoid "costly debts" in the new year by preparing their finances adequately and saving during the autumn and winter months.
About the Author
Tom Dawson writes for Essentially Home Loans where visitors can apply for secured loans online, we also specialise in bad credit loans for UK residents. Visit Today: http://news.essentiallyhomeloans.co.uk
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