Britons' debt shows first fall since records began

The amount of debt Britons owe fell for the first time since records began during July, figures showed today.





People repaid £635m more than they borrowed during the month, reducing outstanding lending to £1.456trn.



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 £418m 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 £217m reduction in unsecured debt, as strong repayments of loans and overdrafts offset a £92m rise in credit card borrowing.



Benjamin Williamson, an economist at the centre for economics and business research, said: "Today's 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 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."



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, also released today, showed that mortgage customers repaid £577m more during July than was lent, the seventh consecutive month during which the figure has been negative.



The sector also suffered a £1.36bn 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.



Adrian Coles, director general of the BSA, warned that mortgage lending was likely to remain subdued for the rest of the year, due to the difficulties lenders faced in raising funds.



The British Bankers' Association said last week that net lending in July fell to its lowest level since October 2000, while specialist lenders are now largely absent from the mortgage market, further reducing the availability of home loans.



Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said: "The sharp fall in net lending during the month demonstrates that lenders still remain a little hesitant to increase the total pot of money committed to the mortgage market.



"Significantly, the mortgage repayments increased to their highest level since March, implying that existing funds are being recycled rather than new monies being added to the mortgage market."



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.



Malcolm Barr, of JPMorgan Chase Bank, said the ongoing rise in approvals for house purchase suggested the weakness in net mortgage lending was likely to prove temporary.



But economists warned that the housing market still remained fragile despite recent reports of price rises and evidence that buyers are returning to the market.



Vicky Redwood, UK economist at Capital Economics, said: "The further 2,000 rise in mortgage approvals for new house purchase to 50,100 in July is modestly encouraging - but at that pace of improvement, it will take several months yet for housing activity to reach the levels consistent with sustained rises in house prices."

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Claims Administrator

    £16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

    Recruitment Genius: Senior SEO Executive

    £24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

    Recruitment Genius: Online Customer Service Administrator

    £16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

    Recruitment Genius: Digital Marketing Executive

    £18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

    Day In a Page

    'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

    Bread from heaven

    Dutch survivors thank RAF for World War II drop that saved millions
    Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

    How 'the Axe' helped Labour

    UK will be 'run for the wealthy and powerful' if Tories retain power
    Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

    The price to be paid for challenging the rule of extremists

    A revolution now 'consuming its own children'
    Welcome to the world of Megagames

    Welcome to the world of Megagames

    300 players take part in Watch the Skies! board game in London
    'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

    Charlotte Gainsbourg on 'Nymphomaniac'

    Starring in one of the most explicit films ever
    Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

    Robert Fisk in Abu Dhabi

    The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
    Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

    Vince Cable exclusive interview

    Charging fees for employment tribunals was 'a very bad move'
    Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

    Iwan Rheon is returning to his Welsh roots

    Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
    Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

    Everyone is talking about The Trews

    Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
    Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

    It's time for my close-up

    Meet the man who films great whites for a living
    Increasing numbers of homeless people in America keep their mobile phones on the streets

    Homeless people keep mobile phones

    A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
    'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

    'Queer saint' who bankrolled artworld giants

    British culture owes a huge debt to Peter Watson, says Michael Prodger
    Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

    Pushkin Prizes brings countries together

    Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
    14 best kids' hoodies

    14 best kids' hoodies

    Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
    Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

    The acceptable face of the Emirates

    Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk