Less unsecured borrowing from households with mortgages

Although mortgage borrowing has been growing rapidly in recent months, households with mortgages have been cutting down on borrowing on credit cards and personal loans, new figures show.

The figures from Alliance & Leicester reveal that since July 2006, homeowners with mortgages have reduced their unsecured borrowings by an average of £197, or three per cent.

Those households without mortgages, however, have continued to take out personal loans and spend on credit cards, although at a slower rate than in the past, increasing their average debt by £98.

The bank also found that the financial burden of debt was decreasing among most households, with overall incomes rising and the interest rates on loans and credit cards reduced in the second half of last year.

Director of retail banking at Alliance & Leicester Chris Rhodes said: "Consumers have shown an unprecedented appetite to reduce their unsecured borrowing, while their incomes have continued to grow and interest costs on their unsecured borrowings have fallen.

"This will have taken some of the sting out of the latest increase in base rates."