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Consumers make record debt cuts

Consumers make record debt cuts

Category: Mortgages

Updated: 01/09/2009
First Published: 01/09/2009

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Personal debt in the UK has fallen for the first time since records began 16 years ago, figures published by the Bank of England have revealed.

In July, the total amount for personal borrowing fell by £600 million, the first time a net repayment on personal debt has been recorded since the Bank began compiling figures in 1993.

The level of personal debt in the UK is now around £1,457 trillion.

Borrowers paid back in excess of £200 million of consumer credit – comprising credit cards and personal loans – more than was lent.

Key to the fall was the net repayment of mortgage debts, with homeowners paying back more than £400 million than was borrowed during the month.

The number of home loans approved saw a rise in July to total 50,123, a figure well up on the last six month average. It is the latest indicator that the housing market recovery will be concerted, continuing into the last quarter of 2009.

"The further rise in the number of mortgage approvals during July is a testament to the continuing recovery in the housing market," said Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors (RICS).

"RICS expects mortgages for new home purchase to continue to edge upwards over the coming months, ending the year between 55,000 and 60,000 but this level of activity still remains low from a historical perspective."

Adrian Coles, director general of the Building Societies Association, said he expected home loan lending to be subdued over the reminder of the year.

"This is primarily because of the difficulties all lenders face in raising funds for mortgage lending," he commented.

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