Consumer credit growth slowed in June

The total outstanding debt of UK consumers increased at a lower rate in June than in the previous month, according to the Bank of England today.

The Bank's figures showed that total net lending - all borrowing less repaid debts - increased by £8.8bn during June to end the month at £1,107bn.

In May lending was up £9.8bn, while the average rise in debt levels over the six months before June was £9.1bn.

The outstanding debt for loans secured on property, including mortgages and secured loans, rose by £7.5bn over the month. This figure was down on May's total (£7.7bn) but stronger than the previous six month average (£7.3bn).

The value of loans approved for homebuyers was in line with May's figure, standing at £11.5bn, while new remortgage business increased to be worth £10.1bn in June compared with £9.7bn in May.

In total, 96,000 mortgages were offered to homebuyers and 100,000 new remortgages were approved.

"The figures indicate that housing market activity is holding at moderate levels, though the economic slowdown and a modest deterioration in the labour market this year has introduced an element of caution into the market," said Milan Khatri, Rics' chief economist.

"However, Rics expects a fall in interest rates, (forecast at the Bank of England's August policy meeting), to provide some support to the housing market in the latter half of this year.

"More timely statistics from chartered surveyor estate agents indicate that buyer purchase enquiries rose in June and anecdotal evidence suggests this improvement has been sustained into July at a national level, despite the recent terrorist attacks in London."

The Bank of England's figures show that the public's appetite for consumer credit not secured on their properties weakened in June.

This type of lending - which includes borrowing on credit cards and personal loans - increased by £1.3bn during the month, down from £2bn in May. Since June 2004, the outstanding debt on consumer credit deals grew by 12.5%.

Howard Archer, chief UK economist at consultancy Global Insight, said the slow growth in lending would add to the pressure on the Bank to cut interest rates.

"Consumer credit growth was extremely weak in June, which will heighten concern that consumer spending is set to remain relatively subdued in the near term at least, despite June's unexpectedly strong jump in retail sales," he said.

"This further supports the already compelling case for an August interest rate cut."