People are being more cautious with their money and spending less because of the financial downturn, it has been claimed.
According to Moneyfacts, there is now less credit available in the market which is having an effect on inflation.
Because of this there is now less money to go around and banks have stricter lending criteria as there is a decreased amount of money.
Darren Cook, a spokesperson for Moneyfacts, said: "I think people are generally being a bit more prudent now and are actually doing a budget and using their disposable income to buy their goods as opposed to using credit cards because they are simply not available."
The Office for National Statistics' Consumer Prices Index showed that the government's target measure for annual inflation was 4.1 per cent in November, down from 4.5 per cent in October.
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