Families with mortgages are cutting down on their credit card debt and other borrowing as the effect of five interest rate hikes begins to squeeze their budgets, a new study has claimed.

Research by Alliance & Leicester has revealed interest payments are consuming more household income and families are responding by reducing borrowing and cutting their savings.

It revealed during the second quarter, mortgage borrowers cut their credit card balances twice as quickly as the average pace of the credit card market.

The average household with a mortgage cut their card borrowing by £351 in the first six months of 2007, while those without mortgages increased their borrowing by an average of £52.

Sean Murphy, director of strategic planning at Alliance & Leicester said: "With the next move in base rates now seen as more likely to be downwards, this could bring [families] some welcome comfort."

Statistics compiled by Credit Action reveal the total credit card debt in Britain in August was £53.4 billion.


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