Mortgages Are Up, Debt Is Down

The BBC reports that mortgage approvals reached their highest level in June for 15 months, an announcement that bodes well for anyone wanting to get onto the property ladder. The market might not have bottomed out just yet, but banks have at least started on the road to recovery and are making more money available to borrowers.

According to the British Banker’s Association (BBA) however, the amount people owe on unsecured loans has fallen by £1.3 billion since the start of the year. We think this is a pretty obvious outcome of the housing crash and credit crunch – do you know anyone who hasn’t worried about their finances over the last year? Even if you’ve weathered the storm with a good job you must have glimpsed the dark spectre of financial ruin lurking just one or two corners away. Instead of buying a new car or an exotic holiday, Joe Public is sorting his finances out.

Interestingly, the slowdown in spending hasn’t translated to a rise in saving – the BBA also reports that savings accounts are being ignored thanks to the low interest rates on offer. Given a choice between saving for a house and paying off debt, it seems we prefer to pay off our debt. A smart move? Well, in the long run we think it is. If you don’t have to service your car loan every month for example, you’ve more money to spend on your mortgage, and this puts you in a better position whatever interest rates do in the months to come. Of course, saving for a deposit is a smart move, but with the dismal rewards on offer it’s not surprising that many of us are going debt-free first.