UK debt takes a dive

Tuesday 1st September 2009

The amount of personal debt in the UK fell by £600 million in July, the Bank of England has said.

This is the first time since records began in 1993 that the amount of personal debt has fallen, and was the result of a dip in mortgage debt and borrowing such as bank loans.

Outstanding lending now stands at £1.456 trillion. The amount of debt was buoyed by low interest rates, which were used by many to pay off more of their mortgages.

The Royal Institute of Chartered Surveyors (Rics) has warned the figures may have been helped by a lack of available lending.

Simon Rubinsohn, Rics chief economist, said: "The fundamental issue remains the withdrawal of many lenders from the mortgage market over the past year and the reluctance of new participants to play a meaningful role in delivering finance to potential homebuyers."

The number of mortgages rose to 50,123 in July, and the amount outstanding on mortgages fell by £400 million. 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.

Peter Harrison, head of credit cards at moneysupermarket.com, said: "It is encouraging to see a reduction in UK consumer debt levels although this doesn't mean that the love affair with credit is at an end.

"UK consumers are definitely being savvier with their borrowing and many consumers are using the low rate environment to overpay on their mortgage borrowing and reduce their overall debt levels."

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