Data revealed by the Bank of England (BoE) suggests that British households repaid most of the money borrowed on credit cards and loans in 2020 since records began 30 years ago. Figures show £16.6bn of net repayments on credit cards, personal loans, student borrowing and car finance last year, making it the most repaid since 1993, and the first annual net reduction since 2011.
BoE said people stopped commuting to work and cut their spending on retail, foreign holidays and leisure during repeat lockdowns, adding that the annual consumer credit growth rate had plunged to -7.5 per cent – the weakest on record. Households made repayments worth £1bn during the usually hectic pre-Christmas shopping month of December. This was followed by more substantial months for paying off credit card and loan balances earlier in the previous year. Over £7.2bn was repaid during the peak month of April amid the first Covid lockdown.
The update comes at a time when pressure remains high from the latest lockdown. Consumer spending has drastically reduced, further dragging down the British economy after a year of fighting the ongoing Covid-19 outbreak. Chancellor Rishi Sunak faces growing calls to launch a brand new package of financial support for businesses, and workers worst-hit by the pandemic. While the Treasury seeks to refresh its response, Sunak has suggested that households saving money could help kickstart the economy as lockdown measures are relaxed. He believes consumer spending could boom after many people saved money in lockdown.
These figures however, do not in any way pin down the intense pressure for several who remain hurt by the pandemic. With millions losing their jobs or suffering loss of income, there are people who have fallen behind on rent, bills, and debt repayments. Reports suggest an estimated 2 million families likely struggle to make ends meet.
Meanwhile, figures from BoE show the highest number of new mortgage approvals were made in 2020 since immediately before the 2008 financial crisis. The real estate market boomed in 2020, with average prices rising to a six-year high. Mortgage approvals for house purchases, according to the Bank, reached 818,500, the most in a year since 2007, and up from 789,100 in 2019.
