Cautious households are paying back “virtually as much as they borrow”, despite a pick-up in people spending money on their credit cards and taking out mortgages, a high street banking report said today.
New spending on credit cards climbed to £7.3 billion in November from its six-month average of £7.1 billion, the British Bankers' Association (BBA) said.
However, consumers continued a long-running trend of paying back more than they put on their plastic, with £7.5 billion made in repayments during the month.
The BBA said that outstanding levels of non-mortgage borrowing contracted by 2.3% over the year to November, driven by a significant shrinking back of personal loans and overdrafts.
Meanwhile, 33,634 mortgage approvals for home buyers worth £5.3 billion were recorded in November, marking the highest number seen since January.
This continues a trend of steady increases seen in recent months, which analysts have put down to a multibillion pound Government scheme aimed at boosting lending to households and businesses, which was launched in August.
However, the BBA said that net mortgage lending has gradually reduced to a "flat balance" amid high repayments being made by home owners on their mortgages as they take advantage of low interest rates to cut down their debt.
Gross mortgage lending totalled £7.7 billion in November, but almost the same amount, £7.5 billion, was made in repayments.
The Council of Mortgage Lenders (CML) said earlier this month that one third of mortgages taken out since 2005 have been overpaid.
The BBA said that inflows into cash Isas have remained strong this year as people have sought accounts paying better rates of interest, leading to a 6.3% rise in all personal deposits over the year to November.
BBA statistics director David Dooks said: "Households are... continuing to repay virtually as much as they borrow and, as people hold on to cash, deposits are growing by 6% annually.
"The situation is not dissimilar in the business world - businesses are holding back investment or expansion plans and building up cash reserves."
Families' budgets are expected to come under further pressure next year from increased costs including soaring energy bills, following a string of price hike announcements.
Research from financial information company Markit has found that three-quarters of households believe their finances will worsen or at best stagnate in 2013.
The BBA also said that net lending to non-financial businesses recorded a £3.1 billion decrease in November.
Its report said firms are continuing to reduce their debt as they wait for more certain trading conditions and a rise in customer and market confidence.