Unsecured consumer credit increased by £52m in December, according to the Bank of England, its first monthly rise since June 2009.
Perhaps it would be of more surprise if the amount of spending had gone down rather than up in the run-up to Christmas. But a feature of the economic downturn has been consumers paying off their debts rather than saving, because interest rates are so low.
This trend has extended to mortgages where borrowers have taken advantage of the savings made on low interest rates by overpaying in an attempt to clear their debt more quickly. With interest rates set to remain low for some months to come, if you are in a position to overpay on your mortgage, this could make sense.
What’s more, it is a good way of improving the equity stake in your property. With lenders offering the most competitive rates to those with at least 25 per cent equity in their homes, paying down your mortgage debt will ensure that you can access a wider range of mortgage deals at better rates.
Most lenders will let you overpay by up to 10 per cent of the mortgage per year without penalty but it differs from lender to lender so it is worth seeking advice before taking the plunge.
mbien@spf.co.uk