Borrowing is something that has always been with us and pretty much always will. But is it on the rise? If so, what types of borrowing are increasing the most and are these a cause for concern? Here we look at a few key types of borrowing and work out what the trends in these are and what they mean?
Certain Types Of Mortgage
Mortgages have had a tough time of it pretty much ever since the 2008 financial crash. Since then there has been a void where 1st-time buyers would normally have sat. But there is a rise in this after many years and, interestingly despite the feeling that home-ownership is difficult now, millennials make up the largest up-takers of new mortgages over the last couple of years. We have also seen a strong showing in buy to let mortgages, which makes perfect sense considering the lack of new home-owners in the last decade.
Borrowing on credit cards is steadily rising just now. This is a worrying trend as, rather than being a mainstay of how a normal household conducts it’s monthly spending, credit card use is more a symptom of paying what can’t be covered through the monthly pay-check. One reason this trend seems to be occurring is the re-emergence in the last few years of sub-prime credit which pretty much disappeared after the financial crash.
The main means of obtaining a car these days tend to fall into two camps. Firstly leasing has become much more popular than in the past as it’s a good way to keep the cost down and driving away with a brand-new car, the downside being that you will never own the vehicle. The second method is the traditional car loan and these days it’s easier than ever to find the right loan as car loan comparison sites like moneyexpert.com allow to scan the whole market in an instant and get the best deals.
Personal loans are certainly on the rise these days and that’s mainly down to availability, especially online as there are so many small lenders that can get access to a much larger potential customer base than in years gone by. Online providers accounted for only 1% of loans in 2010 compared to around 30% today, showing the power of this section of the market. This gives the consumer the impression of much more choice, which is true, but what is the quality of this choice. There are many companies offering credit to those with bad credit, or on low incomes, the problem with this is that it gives those in a vulnerable financial situation a temporary way out of a problem only to be in much worse trouble down the line.
Another rise in borrowing comes at government level. We can see that the expected deficit by the year 2020 is due to be $1.1 trillion and the deficit the largest since 2012. This shows that borrowing is getting more in the US economy and is getting worse.