CONSUMERS paid back credit cards at the fastest pace since before the financial crisis last month, official figures showed yesterday.
Net lending slid by £0.2bn in the month, and came in 0.6 per cent lower than in the same month of 2011, according to the Bank of England data.
The fall indicates another rise in households paying off their debts instead of increasing borrowing to consume,
But business borrowing rose very slightly, defying the major downward trend in lending over the last year.
On a net basis bank lending to firms increased by £0.1bn in the month, while the average effective interest rate on new loans fell 10 basis points in the month to 2.5 per cent.
That contrasts with a 1.1 per cent fall in lending over the three months to July and a 2.2 per cent drop over the previous year.
More cash was raised on the debt markets, too, with a net £0.9bn increase in bond debt.
The government and Bank of England hope that the new funding for lending scheme will push banks to lend more.
Yet some bank analysts fear there is little demand from firms for more debt. “Most lenders see declining credit demand from firms, other than SMEs,” said Barclays’ analyst Chris Crowe.
“Only a small minority of firms see credit cost or availability as a binding constraint on investment. More than half of firms cite demand uncertainty as a factor inhibiting their capital spending.”