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Consumer borrowing at highest level since 2005


British people borrowed more money in March then they have done before the 2008 financial crisis, according to figures from the Bank of England (BoE).

The biggest rise came from unsecured borrowing, such as overdrafts and bank loans, which accounted for £1.1 billion of the overall £1.24 billion rise. Credit card lending increased by £200 million.

In contrast, mortgage approvals actually fell after three months of growth from 61,523 in February to 61,341 in March.

The BoE claimed that low borrowing rates coupled with 0% inflation helped boost confidence among consumers, despite weak wage rises. In relation to this, the British economic recovery has become increasingly reliant on spending by households.

British debt charity Stepchange has now warned that increased borrowing can lead to increased debt among consumers. Insolvencies have been at their lowest level since 2005 this week, and this was thanks to a large reduction in borrowing after the financial crisis. Experts are now concerned that insolvencies may start to increase again as consumers feel more comfortable borrowing money.

Business lending was also up in March by £2.72 billion, the largest monthly increase since records began in mid-2011, the BoE.

Howard Archer, the chief European and UK economist with IHS Global Insight said:
"March's sharp rise will likely fuel concern that consumers will pile up debt again to fund spending."

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