With news that the level of unsecured borrowing per UK household has fallen by an average £500, the majority of Midlanders say they are less likely to borrow in the year ahead, according to PwC's annual report on the UK consumer credit industry: 'Precious Plastic 2011'.  The report's findings together with news from the Bank of England that mortgage lending fell to its lowest level since 2008 in Q4 2010 indicate that the borrowing habits of UK consumers are changing significantly.

The majority of Midlanders (68%) said they would not be willing to borrow in order to fund large purchases in the year ahead and one in three (31%) are concerned about being able to meet repayments on their existing debt. According to PwC, attitudes to borrowing are being affected by weak levels of consumer confidence - 23% of Midlanders admitted to being concerned about losing their job in the coming year, more than in any other region of the UK, except the North, where a similar level of concern about job security was reported. The majority of Midlanders (57%) are also expecting their pay to reduce or remain frozen throughout 2011.

Mark Smith, regional chairman at PwC in the Midlands, said:

"It is clear that attitudes to borrowing are shifting in the region and this is being compounded by weak levels of consumer confidence, mainly due to concern about job security and the widespread freeze on pay. As a result, many households in the region are seeking to reduce the amount that they borrow.

"Consumers in the region are returning to 'jam jarring', whereby they shun large loans and open ended credit cards in favour of smaller, shorter term borrowing, in an effort to control their borrowing.

"Therefore it is not surprising that we have seen average unsecured credit (ie credit cards and personal loans) fall by some £500 over the last year to £8,000 per household - a trend we predict will continue over the next few years with a further fall of up to £300 in 2011."

"However, we believe that interest rates could rise by 2 to 3% by 2015, meaning the average UK household would need to find an extra £1,800 a year for interest payments alone - a significant proportion of their disposable income."

According to the report, those consumers that do wish to borrow are finding it increasingly difficult to obtain credit - supply will continue to be constrained and many of the mainstream lenders, seeking to reduce credit losses, are focusing on only those with a stronger credit history. At the same time it is likely that credit scores have deteriorated across the UK, meaning that an increasing number of consumers will find themselves unable to borrow from the mainstream lenders, effectively forcing them into the 'underbanked' category.

Mark Smith, regional chairman of PwC in the Midlands, continued:

"There is strong evidence that the type of credit demanded by consumers is changing. Point of sale products, payday loans, home credit providers and pawnbrokers will all play their part in providing for consumers but the cost of credit still needs simpler explanation."

The UK's cooling passion for plastic continued as the number of credit cards in circulation fell by some 1.5 million compared to 2009, to the lowest levels since 2003. By contrast, in 2010, debit cards have continued to gain in popularity, overtaking cash for the first time.

Demand and supply have both played a part in the decline in the use of credit cards. Consumers are focused on paying off their debts and are planning to save more, while lenders remain selective in terms of whom they lend to.

In PwC's consumer credit confidence survey, 41% of people want to put money away compared to 35% at the end of 2009. Within these figures a startling number of young people indicated a willingness to save, with over 70% of 18-24 year olds intending to save more over the next 12 months - more than double the proportion of over 45s.

Further regulation of the consumer credit market is in prospect - and there is talk of potential interest rate caps. Whilst this may be of benefit to some consumers, it could potentially make the provision of credit to many uneconomical.

Total household borrowing in 2010 fell by £6 billion to £1.45 trillion. Within this amount, secured lending (mainly mortgages) actually grew slightly on the previous year to around £1.24 trillion. However, with the Bank of England stating that Q3 of 2010 saw a 'marked decrease' in mortgage lending by banks, we can expect this figure to decrease in 2011. The more significant change has come in the decline in unsecured credit, with outstanding balances down £13 billion on 2009 to £214 billion, a trend that looks set to continue.