Atotal of £3.171 billion was lent to consumers, an increase of just three per cent compared with the corresponding month in 1998, show figures from the Finance and Leasing Association.

During the last 12-month period, growth has slowed to 13 per cent, almost half that recorded two years ago.

Despite the slowdown in the market, the secured loan sector - where the cash lent is secured against a house or other possessions - appears to be weathering the storm.

It recorded a 25 per cent increase in new business during February compared with the same month last year and grew 44 per cent over the last 12 months.

The FLA said many consumers are taking advantage of falling interest rates to negotiate a better rate on their existing loans rather than take out new lending.

As most people were now in positive equity on the value of their homes, they were securing cheaper loans against the value of their properties.

Martin Hall, director general of the FLA said: "A significant proportion of both secured and unsecured loans are being used for consolidation of debts, with consumers taking advantage of lower rates.

"Secured loans are particularly popular at present because of the buoyancy in the housing market."

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