Store instalment credit rose sharply in December, as consumers spent 17% more using instalment credit in the run up to Christmas 2009 than they did in 2008, according to new figures from the Finance & Leasing Association.

the consumer credit trade body says it is likely that some of this rise can be attributed to the restoration of VAT rates to 17.5%.

New consumer lending provided by FLA members overall was down by 15% in 2009 compared with 2008. The breakdown of products shows that credit card, store card and store instalment credit spending have held up, relative to longer-term credit products. Customers are using instalment credit for smaller purchases of furniture, white goods and home electronics, usually costing £700 or less.

Second-charge mortgages and personal loans have shown the largest falls – availability of funding and increased risk of customers defaulting have hampered lenders’ ability to lend. Low consumer confidence is also an issue, the FLA claims, saying people do not want to take out long-term credit commitments, while so much uncertainty surrounds the economic recovery and unemployment levels remain high.

The FLA’s head of consumer finance, Fiona Hoyle, said: “Our figures tell a wider story of the recession. Overall