Rate freeze likely as debt slows

CONSUMERS' appetite for taking on new debt has slumped by the biggest amount in two years, reinforcing expectations the Bank of England will keep interest rates on hold this week.

Figures from the Bank, released three days before the monetary policy committee sets the cost of borrowing, showed total net lending rose by £6.9bn in June, a 16% drop on May's record £8.2bn and the biggest percentage decline since July 2000.

Within this, mortgage lending rose by £5.6bn against £6.8bn the previous month. Consumer credit, which includes spending on credit cards and personal loans, rose by £1.3bn against May's £1.4bn. The number of mortgage approvals - loans agreed but not yet made - fell to 105,000 from 123,000.

The Bank issued a health warning over the figures, pointing out they may have been distorted by the Golden Jubilee celebrations and the World Cup. It estimated that if there had been the usual 21 working days in June rather than this year's 18, the number of mortgage approvals would have been 118,000.

Jason Simpson, strategist at ABN Amro, said: 'I think the number could get worse in July. The equity slide was not really in full swing in June. You would expect that to feed through more in next month's figures.'

Sterling was a third of a cent lower at $1.5620. The euro was down by a similar amount, at 98.10 US cents, or 62.80p against sterling.