NERVOUS consumers have cut the amount that they owe on credit cards for the first time in more than a decade, fuelling fears that an abrupt move by Britons to curb their high spending habits will undercut the economy.

The vast amount of outstanding debt run up by consumers on their plastic cards was pared back in April — the first time that there has not been a monthly rise since May 1994.

Last month cardholders paid back a net £40 million as payments to lenders outstripped new borrowing, according to figures from leading banks represented in the British Bankers’ Association.

The net repayment made only a tiny dent in the £34 billion which the nation has outstanding on credit cards. But the surprise figures were seen by City experts as the latest and most striking symptom of the retreat by shoppers from the high street amid growing signs of distress among some retailing chains. In another indication that higher interest rates and the downturn in the housing market have triggered a sea-change in households’ sentiment, the association also reported that there are signs that people have begun to increase their savings.

Personal deposits with the big banks rose by £3.4 billion last month — a much stronger figure than the recent monthly average of around £2.3 billion, and the second month in a row of strong inflows of savings.

David Dooks, the association’s director of statistics, said that April’s consumer borrowing was “noticeably weak, with a rare net monthly repayment of credit card borrowing”.

Mr Dooks noted that borrowing through bank loans and overdrafts also saw only a small rise and said there had been “an apparent change in sentiment towards credit”.

News of the trend in credit card borrowing came just a day after gloomy official figures for high street activity, which showed that the unadjusted amounts spent by consumers compared with a year earlier fell in April for the first time in almost four decades.

The £18.3 billion going through the country’s tills last month was 0.1 per cent down on a year earlier. Although this was distorted by the changing timing of Easter, it was the first such drop since May 1967.

While April’s small repayment of credit card debt disappears if the banking association’s adjustments for volatile seasonal trends in borrowing are removed, City economists said that the figures nevertheless added to the picture of a deepening consumer downturn.

“It suggests that there is a growing sense of caution out there, that consumers are perhaps not only slowing down the amount of new debt they are taking on, but beginning to repay some existing debt,” Ross Walker, of Royal Bank of Scotland, said. “One would imagine that this is not a one-off — that we will see this sort of picture repeated in the coming months.”

Jonathan Loynes, of Capital Economics, said that previously, credit card borrowing had consistently grown year after year at an annual rate of about 12 to 15 per cent.

With the house price downturn seen as a driving force behind the slide in consumers’ activity, mortgage lending figures yesterday suggested that conditions in the property market remain very subdued.

Mortgage lending in April by the big banks, after stripping out repayments of loans, rose by £4 billion — £500 million less than in March and the average figure for the past six months.

Hopes that housing market activity will stabilise at low levels received a boost as separate figures from the Council of Mortgage Lenders showed a modest rise in new home loans last month. Ed Stansfield, of Capital Economics, said that market activity “seems to be stabilising, but little more”.

Explore UK News

• Crime News

• Education News

• Health News

• Scotland News

Times Recommends

• Mourinho wants to go ‘home’ to England
• Worship of children has gone too far
• 100 best winter wines