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Steep fall in consumer debt write-offs

The amount of consumer debt banks wrote off fell steeply in the third quarter after hitting a record high during the previous three months.

Banks and building societies wrote off £1.83bn of debt that people had defaulted on during the three months to the end of September, 47% less than the £3.47 bn cancelled during the previous quarter, which was the highest level since Bank of England records began in 2004.

The drop was driven by a steep fall in the level of credit card borrowing that consumers were unable to keep up with, with lenders writing off just £740m during the third quarter, compared with a record £2.14bn during the previous three months - which was only the third time the figure had ever been above £1bn.

Write-offs improved across all types of lending, with cancelled mortgage debt falling by 27% to £134m.

There was also a 17% fall in defaults on other types of debt, such as loans and overdrafts, with banks writing off £959m in this area.

The steep fall in write-offs may in part be a correction following the high level of debt that was cancelled during the previous quarter, but it is also likely to reflect an improving trend in consumers' finances.