Unsecured borrowing hit an all-time high

Paresh Davdra is the Dealing Director of RationalFX, Currency Specialists. Wednesday 25th March 2015 10:52 EDT

The rate of growth is the fastest in a decade, and represents an additional £19.6bn borrowed last year.  With borrowing set to reach £10,000 per household by 2016, Brits are even more exposed to a hike in the Bank of England’s base rate, currently at a record 0.5 per cent low.
Also a new report from think tank "Open Europe" looked at the potential for the UK to leave the European Union indicating Britain's economy could take a hit of up to 2.2 per cent of GDP or £56bn by 2030. The report argues that in the worst case scenario, the negative effects of a British exit would not wholly be offset by a new free trade agreement with the EU.
As part of the Eurozone’s stimulus package Banks took 97.8 billion euros in the so-called TLTROs, which are tied to lending to the mostly smaller firms that are the euro zone's economic backbone. Banks took more than twice the expected amount of long-term loans from the European Central Bank on Thursday, loading up on the cheap credit is a fresh sign that this lending will help to spur the recovery.
The ECB is offering banks the loans as part of a cocktail of measures aimed at pumping around 1 trillion euros into the euro zone economy, with a view to shifting inflation from below zero towards its target of just under 2 percent.
The ECB made its latest batch of TLTROs more attractive by removing a 10 basis point premium over its main interest rate of 0.05 percent that was applied to the first two tranches. Thursday's bumper loan take-up came after the ECB earlier this month painted an upbeat picture of the euro zone's growth outlook as it embarks on a plan of money printing to buy sovereign bonds, a policy known as quantitative easing or QE.
The Dollar weakened on Friday after the US interest hike again dominated the headlines, this time Atlanta Federal Reserve President Dennis Lockhart played down the certainty of a June rate hike. Lockhart indicated it could be during June, July or September policy meetings, barring a significant downturn in the economy. The lower economic forecasts issued by the Fed earlier this week reflect mostly "transient" changes that do not fundamentally change its outlook for continued U.S. growth Lockhart told reporters.
Cheap borrowing costs are keeping homes affordable for some Americans. The average 30-year, fixed-rate mortgage was 3.86 percent in the week ended March 12, according to data from Freddie Mac in McLean, Virginia. That’s below the average 4.26 percent rate since the expansion began in June 2009.
Greater employment opportunities are providing support for the housing industry as well. The economy added 295,000 workers last month, more than forecast, and the unemployment rate dropped to 5.5 percent, the lowest in almost seven years. At the same time, weaker income expectations are weighing on consumer confidence, which declined in March to a four-month low.

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