Recent reports have stated that the level of personal debt in the UK is at its lowest rate ever since records began, according to the Bank of England.

The level of personal borrowing has reportedly fallen by £600 million in July, taking the total owed by individuals down to £1.5 trillion. There has been a drop in both mortgage debt and other forms of borrowing such as bank loans.

The number of mortgages, which have been approved in July rose again to 50,123, suggesting property sales will continue to rise. However, this could also be an indication that debt levels may rise in the near future.

The Bank of England, announced: "Total net lending to individuals fell by £0.6 billion in July, showing a net repayment for the first time in the series."

The amount outstanding on mortgages fell by £400 million as people repaid more than they borrowed during July.

However, the amount accumulated on what is called consumer credit, such as loans and hire purchase agreements, dropped by a net £200 million, once a small rise in credit card borrowing of £92 million was taken into account.

Lending may be affected

Benjamin Williamson from the centre for Economics and Business Research, (CEBR), said: "The news will not make happy reading for policy makers who have taken significant steps over the last year to encourage greater volumes of lending throughout the economy."

Adrian Coles, the director-general of the Building Societies Association, (BSA) stated that: "The mortgage market continues to show signs of some sort of recovery when compared to the first few months of this year. The BSA expects the mortgage market to remain similarly subdued over the remainder of 2009."

Mr Coles also warned that this process would hinder the ability of banks and building societies to lend money to potential home buyers.

He said: "Total UK savings balances might struggle to increase by £11 billion in 2009, much lower than the £60 billion increase in balances in 2008. These figures include interest added to accounts. If this amount of interest were not included, such a low forecast for 2009 suggests that savers will actually withdraw more money than they deposit this year across the entire savings market."

The Royal Institution of Chartered Surveyors (Rics) warned that the reduced number of lenders in the market would also put a cap on any increased mortgage borrowing.

Simon Rubinsohn, the chief economist at Rics, said: "The fundamental issue remains the withdrawal of many lenders from the mortgage market over the past year and the reluctance of new participants to play a meaningful role in delivering finance to potential homebuyers."

Some may never pay off debts

Despite the reports that personal debts have reduced, further research has indicated that three in 10 people who seek debt advice will never find a way out of debt unless they earn more money, according to the Consumer Credit Counselling Service (CCCS).

Frances Walker, a CCCS spokesperson, said that although it's "good news" many people are starting to pay off debt in the recession, for a significant number of people in debt, it is almost impossible to find a solution.

The CCCS has received 300,000 enquiries from consumers seeking financial advice this year. Some 90,000 of these will be unable to pay back all the money they owe without finding a way to earn more, Walker said.

She also said: "The problem we are finding is that people, who are over indebted, are having more difficulty paying their debt back and we're not expecting this to change for some time."

"Also people's debt problems are more complicated now than they were a few years ago because they often have mortgage arrears and have experienced a drop in income."