The figures show consumer lending has fallen back slightly from December, but December was specia

John Butler, economist at HSBC

The bulk of the decline was due to slower growth in credit card spending and overdraft borrowing, which expanded by �1.6bn, down from �2.1bn the previous month.

But mortgage demand remained strong, growing by �5.3bn in January compared to just �4.9bn in December.

Credit growth unsustainable?

The weaker figures follow a record rise in consumer borrowing in December, when total lending to individuals posted its biggest monthly increase since records began in 1993.

The sharp increase in borrowing that month fuelled speculation that consumer credit growth was reaching unsustainable levels, possibly forcing the Bank of England to raise interest rates early this year.

Analysts said the latest figures suggest that underlying demand for credit remains strong.

"The figures show consumer lending has fallen back slightly from December, but December was special," said John Butler, economist at HSBC.

The BoE cut rates by two percentage points to a 37-year low of 4% last year in a bid to stave off recession.

The lower borrowing costs have stimulated debt-financed consumer spending, offsetting weakness elsewhere in the economy, but possibly stoking up inflationary pressures.

The BoE has yet to start putting interest rates up, with its next rate-setting meeting scheduled for 6 and 7 March.

Debt crunch

A sharp increase in interest rates would make it more difficult for consumers to pay off their accumulated debts, delaying a full economic recovery.

Separate data on Friday from the Credit Card Research Group suggest that the UK consumer's love affair with plastic shows no sign of waning.

While total credit and debit card spending fell in January compared with December, plastic-financed purchases accounted for more than half of the total for the first time ever.

The CCRG said the figures represent "a significant milestone on the march towards the cashless society."

Credit card spending for January totalled �7.6bn, just below �7.7bn in debit card purchases.