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2 September 2009 Personal debt falls to record low

Personal debt in the UK has fallen for the first time since records began in 1993, according to the Bank of England.

Latest figures show that personal borrowing dropped by £600 million in July, despite a rise in the number of mortgage approvals.

The decrease means that outstanding lending to individuals now stands at £1.457 trillion.

Historically low interest rates and a lack of personal bank loans are believed to have contributed to the decline in UK borrowing.

Outstanding mortgage payments plunged by £400 million in July, as many Brits used the extra cash generated by low interest rates to pay off more of their mortgage.

Meanwhile consumer credit, which includes bank loans and hire purchase agreements, fell by £200 million.

Commenting on the data, Benjamin Williamson from the centre for Economics and Business Research, said: ‘[The] news will not make happy reading for policy makers who have taken significant steps over the last year to encourage greater volumes of lending throughout the economy’.