Consumer borrowing set to fall amid fear of rate rises

Consumer borrowing is set to plummet this month, with Britons intending to borrow an average of £29 a person, according to findings from Alliance & Leicester.

This is almost half the amount borrowed per person in July, which stood at £56.

A&L&#39s quarterly wealth tracker index shows that Britons fear being burdened with debt if interest rates rise in a recession.

The index shows people will have more cash than in July, with the average mon-thly disposable income per person rising by 15 per cent to £333 from £287 in July. Falling interest rates have reduced mortgage payments, giving people more cash. Britons intend to put 30 per cent, or £138, into savings and investments. Despite volatile stockmarkets, people say they will invest an average of 9 per cent of their disposable inc-ome compared with 8 per cent in July.

Thirty-two per cent of disposable income will be saved, the same as in July.

Consumer spending is fall-ing slightly since July, with people spending 58 per cent of their disposable income, down from 60 per cent in July.

The index is a quarterly analysis of saving habits which asks 2,000 people about their level of disposable inc-ome and how much was saved, spent, invested and borrowed.

A&L product manager (investment and pensions) Simon Ripton says: “Despite difficult conditions in the past few months, Britons have a higher disposable income and continue to spend, save and invest similar proportions of their money. People are not intending to borrow as much money this month, suggesting many do not want to risk getting in to serious debt in recession.”