The levels of personal debt shrunk last year as UK banks and building societies wrote off some £9.6 billion of loans to individuals in the 12 months to the end of quarter one this year. Data from Credit Action shows that loans to the value of £2.13 billion, £1.25 billion of which was comprised of credit card debt, were written off by UK financial institutions over the first three months of the year - the equivalent of £23.35 million a day. Total personal debt in the UK at the end of May stood at £1,460 billion, a figure that has grown by 0.9% over the last 12 months and is more than the country produces over the course of a year. The rate of acceleration in household debt has slowed considerably. It is currently increasing by 0.06p a day, down from £11.11 a day in January 2008.

The Bank of England has revealed that mortgage defaults fell during the second quarter of the year, a development it said was unexpected. While the trend of falling defaults is consistent with figures seen since last year, the Bank said, barring one-off events, the default rate and losses were expected to remain unchanged during the three months from July to August. The survey also found that lenders reported a rise in availability of secured credit to households, but that it was expected to fall back over the next three months. This reflects some lenders' expectations that wholesale funding market conditions may tighten. Demand for secured lending for house purchases was reported to have fallen somewhat from April to June, but, by contrast, demand for lending for remortgaging registered a rise for the first time since quarter four of 2008. "Significantly, from a property market perspective, the availability of credit over the past three months appears to have increased both in the residential and the commercial sectors. However, it is noteworthy that this improvement has not been driven by any change in the attitude to risk. In both these areas of the property market, this particular indicator has barely budged after the sharp falls through 2008 and the early part of 2009," said Simon Rubinsohn, chief economist of the Royal Institution of Chartered Surveyors.

Ultra low interest rates are causing dangerous side effects that could endanger the economic recovery, a powerful global body has warned. The Bank for International Settlements said policymakers need to consider ratcheting up rates from near zero levels, withdrawing from money printing operations and reversing hefty public spending programmes to avoid a renewed financial bust. 'The time has come to ask when and how these powerful measures can be phased out' the BIS said in its annual report. 'We cannot ignore the fact that the cumulating side-effects themselves pose a danger that, at the very least, implies exiting sooner than may be comfortable for many.'

Business investment rose by the biggest margin in more than 20 years between January and March, boosting hopes that economic growth in the first quarter may be stronger than previously thought. The Office for National Statistics (ONS) made a sharp upward revision to its initial growth estimate, from 6 per cent to 7.8 per cent. This is the biggest quarterly increase in business investment since the third quarter of 1987, excluding the rise caused in 2005 by the reclassification of British Nuclear Fuels Limited as a public corporation.

House prices are up three per cent so far this year, Britain's biggest building society said yesterday. But the rate of increase stalled this month. Nationwide Building Society said the average cost of a house edged ahead by just 0.1 per cent in June following a rise of 0.5 per cent in May. And more homes coming on the market over the summer will slow price rises as supply outstrips demand. Many experts believe the slowdown is not entirely negative as the pick-up in the housing market has got too far ahead of the recovery in the wider economy.

Vince Cable and George Osborne held a 'banking brainstorm' at Number 10 on Wednesday with leading economists and industry experts to thrash out some of the possible ways of forcing banks to lend more. The business secretary, the chancellor and two junior ministers met eight other leading lights, including regulators, economists and former bank bosses. They included Richard Lambert, director-general of the CBI, the employers’ organisation, Spencer Dale, chief economist at the Bank of England, and David Strachan, in charge of financial stability at the Financial Services Authority. The meeting followed a similar one at the business department between Mr Cable and Stephen Hester, chief executive at the Royal Bank of Scotland, which dealt specifically with lending to small and medium-sized companies. On the back of this meeting a global survey has highlighted the risk on Britain's leading position in international banking and finance should the Government decide to split up the biggest banks. Despite the financial crisis, the British banks HSBC, Royal Bank of Scotland (RBS) and Barclays are among the world's largest 10 banks in terms of capital strength, while Lloyds came 12th, according to The Banker magazine. Its annual survey of the world's top 1,000 banks also revealed that Barclays was the fourth most profitable in 2009. But the survey warned the coalition of the consequences of separating the UK's biggest banks into retail and investment divisions, suggesting that banks such as HSBC may relocate to Hong Kong.

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