The amount of debt Britons owe fell for the first time since records began during July, figures show. People repaid £635 million more than they borrowed during the month, reducing outstanding lending to £1.456 trillion.
The drop, which was the first since the Bank of England began collecting data in its current format in 1993, was driven by a fall in both mortgage lending and unsecured credit.
Homeowners repaid £418 million more than they borrowed during the month, due to a combination of the ongoing problems in the mortgage market restricting new advances, and people using low interest rates as an opportunity to pay down their debt quicker.
There was also a £217 million reduction in unsecured debt, as strong repayments of loans and overdrafts offset a £92 million rise in credit card borrowing.
Benjamin Williamson, an economist at the centre for economics and business research, said: ”(The) news will not make happy reading for policymakers who have taken significant steps over the last year to encourage greater volumes of lending throughout the economy. While (the) data is surprising, it is important to remember that this monthly net change is relatively small given the stock of lending in the economy.”
The negative net mortgage lending figure, which was also the first on record, reflects the ongoing problems in the mortgage market, as lenders struggle to raise the funds they need to advance to consumers.
Separate figures from the Building Societies Association showed that mortgage customers repaid £577 million more during July than was lent, the seventh consecutive month during which the figure has been negative.
The sector also suffered a £1.36 billion reduction in the level of savings consumers held with it, the sixth fall this year, further reducing the level of funds available to mutuals for mortgage lending.
But there was some better news, with the number of mortgages approved for house purchase rising for the sixth month in a row to 50,123, the highest level since April 2008.
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