The size of the overall consumer credit market remained flat in July, as a rise in credit card repayments offset an uptick in personal loans.
Fresh data from the Bank of England showed that the annual growth rate for all consumer credit remained weak, falling slightly from -2.2 per cent in June to -2.7 per cent in July.
People repaid £100m on their credit cards last month, while ‘other’ forms of consumer credit such as car dealership finance and personal loans rose by the same amount.
Meanwhile, individuals repaid £1.4bn of mortgage debt in July, in stark contrast to June’s record net borrowing of £17.7bn that was likely boosted by the initial tapering off of the stamp duty break.
“Net repayments are relatively rare, with only one other repayment (in April 2020) in the past decade,” the Bank of England said.
Gross lending dropped to £16.5bn, its lowest since June 2020, while gross repayments were a little below the 12-month average, at £18.1bn.
Approvals for house purchases, an indicator of future borrowing, dropped further to 75,200 in July. This was the lowest since July last year but still above pre-February 2020 levels.
The weak July data follows signs of a recovery in recent months. June statistics showed that consumers borrowed £300m of debt, while mortgage lending reached an all-time high.
Meanwhile, business lending grew to £3.7bn last month from £1.5bn in June.
This was due to large businesses borrowing £4.9bn, the highest amount borrowed since April 2020.
However, it was partially offset by small- and medium-sized businesses who repaid £1.2bn of loans last month.
“The net repayment by SMEs of £1.2bn is the largest on record, and follows average net borrowing of £2.7bn per month since March 2020,” the Bank of England said.