Desire to clear debt may be behind credit fall

The growth on unsecured credit in the UK declined in July, new figures have indicated.

Bank of England statistics for lending to individuals during the month showed a £0.2 billion rise in such borrowing.

However, this was down from the £0.4 billion seen in June, as well as being less than May’s £0.3 billion rise and the £0.5 billion increase of April.

One notable aspect of the breakdown of types of credit was that credit card borrowing rose by the same amount as in June (£0.3 billion).

Instead, it was among loans and other advances that there was a drop in borrowing, with the decline being absolute rather than relative with the £0.1 billion increase of June being replaced by a £0.1 billion fall last month.

Such a figure may suggest that many consumers are seeking to get debt free by reducing what they owe on loans.

This could include using any savings available to pay off what they owe in an early settlement, which can save money in the longer run.

Alternatively, those whose loan repayments are coming to an end may be more likely than before to decide against taking on new borrowing.

Data showing a fall in consumer credit has also been revealed by other recent surveys.

One of these came from the Finance and Leasing Association, which revealed that the £51 billion its members lent in June was three per cent less than a year before.

Loans such as second mortgages, credit cards and storecards all dipped – the latter being down 22 per cent – while only car credit bucked the trend with a one per cent increase.

By James Francis