Sales fuel credit card spree

Britain's shoppers stacked up debt on their credit cards at the fastest rate for almost three years last month, as they shrugged off uncertainty about the health of the housing market to take advantage of heavy discounting in the high street.

Despite the knock to confidence in the run-up to war in Iraq, March saw a £400m increase in credit card borrowing - the largest since May 2000 - according to the British Bankers Association, which represents the major lenders.

Anecdotal evidence suggests that retailers have been slashing prices to tempt shoppers back into the spending habit, after the British Retail Consortium reported that sales volumes fell last month.

But the BBA said yesterday's resurgent borrowing figures showed that "consumers remained very active in March".

Households also increased other unsecured debt, including personal loans and overdrafts, by £500m.

Confidence-boosting interest rate cuts by the Bank of England have helped underpin the housing market and boost consumer spending over the past two years, offsetting the global economic downturn.

However, mortgage lending figures, also released yesterday, held signs of a slowdown in property sales. The Council of Mortgage Lenders said borrowing by homebuyers was lower in March than a year ago, at £7.8bn. Total mortgage-lending in March was up on 2002, at £19.3bn, but as much as half of it was accounted for by existing homeowners remortgaging their properties as they took advantage of low interest rates to shop around for a better deal.

"The mortgage market is still performing very strongly, although remortgaging is the main driver of the current buoyancy," said Michael Coogan, the CML's director general.