The total amount of personal debt in the UK has fallen for the first on record, according to new figures from the Bank of England. Mortgage repayments also outstripped new lending for the first time since records began in 1993.

Personal borrowing fell by £600m in July with the amount of money owed by individuals totalling £1.457 trillion. There was a decrease in both mortgages and personal loans.

The steep drop in mortgage lending was driven by the ongoing restriction of the amount banks and building societies are prepared to advance, with the British Bankers’ Association admitting last week that net lending in July fell to its lowest level since October 2000.

Separate figures released today by the Building Societies Association revealed that homeowners repaid £557 more on their mortgages than was lent. Many mortgage customers are taking advantage of low interest rates to increase the amount they repay each month.

Whilst borrowing on credit cards rose by £92 million during July, net repayments on personal loans and overdrafts rose to £309 million, as consumers attempt to clear their debts in the face of rising unemployment.
Overall the total volume of lending to individuals contracted by £635 million - the first time on record that the figure has been negative.

“Today’s news will not make happy reading for policy makers who have taken significant steps over the last year to encourage greater volumes of lending throughout the economy,” said Benjamin Williamson at the Centre for Economics and Business Research (CEBR).

“While today’s data are surprising, it is important to remember that this monthly net change is relatively small given the stock of lending in the economy,” he added.

This entry was posted on Tuesday, September 1st, 2009 at 3:37 pm and is filed under Banking, Budgeting, Credit Cards, Housing Market, Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.