Figures calm fears on interest rates

FEARS that the Chancellor of the Exchequer and the Governor of the Bank of England will tomorrow agree a rise in interest rates receded yesterday as official figures showed slower growth in consumer borrowing and the amount of money in the economy.

Net lending to consumers from building societies, finance houses and on bank credit cards fell sharply in July from June's record pounds 683m to pounds 296m. The figures have been extremely erratic in recent months, but fell slightly between the three months to April and the three months to July.

The Treasury said the figures were consistent with a rise in consumer spending. The total amount of new credit advanced in July was pounds 4.9bn, down from pounds 5.2bn in June and an average of pounds 5bn a month over the first half of the year.

A net pounds 35m of bank credit card debt was repaid in July, compared with net lending of pounds 267m in the previous month. Building societies and finance houses both cut their lending for consumer spending.

'The data will be seen as further evidence that the pace of recovery is easing,' Simon Briscoe of Warburg Securities said.

Separate figures from the Bank of England showed that the narrow money supply measure M0 - cash plus banks' balances held with the Bank of England - rose by only 0.1 per cent last month, seasonally adjusted. The annual rate of growth slowed for the third successive month, to 6.2 per cent, but remains above the Treasury's 0-4 per cent 'monitoring range'.

The Treasury said the money supply figure had been depressed by an unusually large fall in banks' balances, with the amount of cash in circulation growing by 0.4 per cent for the second month running. Net mortgage lending fell from pounds 1.8bn in June to pounds 1.5bn in July, leaving pounds 366.6bn in mortgage debt outstanding.

Figures from the Department of the Environment showed that building started on 56,000 new houses between May and July, up 15 per cent on a year earlier and 1 per cent on the previous quarter, after adjusting for normal seasonal changes. Completions rose 7 per cent from a year earlier to 44,900.