Latest figures from the Bank of England have shown lending on credit cards and loans have fallen to an 18-month low.

The Bank of England figures showed that unsecured consumer credit grew by 9.6% year on year in October, down from 9.8% in September. Consumers added £1.5bn to the pile of consumer debt, which rose to more than £205bn.

With salary increases averaging 2.2% and prices increasing at an average of 3%, central bank officials have warned high street banks to rein in their risky lending to head off a consumer debt bubble.

Howard Archer, an economic adviser to the forecasting group EY Item Club, said: “The Bank of England will be pleased with the slowdown in consumer credit in October and will be looking for a continuation of this trend. “In its November financial stability report the Bank of England again warned that rapid growth in consumer credit has created a ‘pocket of risk’ and the central bank has also warned that banks risk becoming complacent in their lending behaviour.”

Peter Tutton, Head of Policy at StepChange Debt Charity, said “Despite a slight slowdown, consumer credit continues to grow strongly, outpacing incomes. Warning signs remain. Yesterday the Bank of England reiterated how lenders may be underestimating the losses they may face in a downturn. While consumer credit represents only 7% of banks’ exposure, it amounts to 40% of impairments in the Bank’s stress test.”

“This comes against the backdrop of forecasts of the longest sustained period of falling living standards since the 1950s, so the fact that 9 million people are currently using credit in order to cover essential costs should put tackling problem debt high on the policy agenda.

“Household financial stress and growing consumer credit create a pocket of risk which policy action can help to close. Regulators need to ensure consumer credit lending is responsible and affordable for households; and with the Government now committed to introducing a Breathing Space scheme to help people manage problem debt, it’s crucial to get it right and into existence as soon as possible.”

Joanna Elson OBE, chief executive of the Money Advice Trust, the charity that runs National Debtline, said: “Whilst the figures show a very slight easing in the rate of increase of consumer credit, outstanding consumer credit balances now stand at over £205 billion.

“With rising living costs, low wage growth and a rise in interest rates contributing to a squeeze on many household’s budgets, there is no room for complacency. A rise of 9.6% in consumer credit growth when wage growth is at 2.2% is clearly a worry.

“Many families are already struggling to make ends meet, and with Christmas fast approaching, we encourage people to exercise caution before taking on additional borrowing and to consider how they would be able to cope with repayments in the event of a shock to their income.

“Anyone struggling to cope should contact National Debtline or another free debt advice agency as soon as possible.”