Bank of England (BoE) latest data on lending shows that households repaid £600 million of debt in October,  the repayment matches the same amount as September. This means the total repaid since the end of March now stands at £15.6 billion.

Credit card debt has fallen by 13% over the past year, with consumers having reined in borrowing amid ongoing uncertainty around the impact of COVID-19.

The BoE report also reveals that borrowing using credit cards, overdrafts and personal loans fell by 5.6% annually in October.

Separately net mortgage borrowing remained robust at £4.3 billion in October. Mortgage approvals for house purchase increased further to 97,500, the highest since September 2007. Effective interest rates on new mortgage borrowing ticked up to 1.78%.

Commenting on the figures  Aire CEO Aneesh Varma said “Today’s figures from the Bank of England show a continuation of new normal financial trends we’ve seen emerging throughout 2020. More consumers are taking advantage of the stamp duty holiday and low interest rates to move and improve their homes, while others continue to reduce their short-term credit commitments.”

“Levels of consumer borrowing on credit cards have fallen by almost a fifth since before the pandemic. Lenders might reasonably expect these levels to tick up again during November and December as people put Christmas on credit. Continued financial uncertainty, low levels of consumer confidence and further winter Covid-19 restrictions mean borrowing levels will continue to fall again in the new year. Mortgage lenders should also expect to see demand fall as government stimulus is removed.

“The fundamental challenge for lenders is that the impact of Covid-19 is not equal. Some people with spotless credit histories and healthy savings going into the pandemic are now defaulting on their credit commitments through no fault of their own, while others have more disposable income now. Lenders have a duty of care towards the consumer as we emerge from this crisis and must be empowered with new ways of understanding their individual circumstances to better serve them.“

Will North Director of Core Credit at TransUnion in the UK said “The latest Money and Credit statistics from the Bank of England reveal mortgage approvals for home purchases remained strong, with net mortgage borrowing for October at £4.3 billion and 97,500 mortgage approvals. This is the highest level since September 2007 and is likely fuelled by the stamp duty holiday which will carry on until March 2021. There have been recent reports of expected falls in property values next year in the wake of COVID-19 and the uncertainty around Brexit but initiatives such as the government’s pledge to build a million new homes in the next five years should help counter that in the longer term.”

“There seems to be a picture emerging of increasing financial polarisation within society. Those without reduced income have remained largely unaffected financially by the pandemic and are therefore better off and perhaps in a strong position to take advantage of schemes like the stamp duty holiday and pay off existing debt. Since the beginning of March, UK households have repaid £15.6 billion of consumer credit, and the October figures show this continuing, with net repayments of £0.6 billion.

“Meanwhile, many of those who have had an income shock via a reduced salary or unemployment are struggling. Our recent Financial Hardship Study report revealed that of those impacted, the number of people still worried about their ability to pay bills remains as high as it was at the start of the pandemic (70% in March versus 71% at the end of November) and that the second lockdown gave rise to renewed financial concern and may exacerbate this further.”

“With Christmas just around the corner and unemployment likely to continue rising, there are further challenges ahead. Chancellor Rishi Sunak’s recent announcement set out clear plans to stimulate the economy and protect jobs but whilst support such as the furlough scheme and payment holidays will continue through to March 2021, lenders need to be planning further down the line in terms of their customers’ financial needs. It’s vital that they have the necessary data, insight and tools at their disposal to identify individual financial circumstances and spot any early warning signs of financial stress.”

Jonathan Sealey CEO of specialist short term lender Hope Capital, said: “While it’s a good sign that the mortgage market remains robust with the number of approvals at a 13 year high, we may also be seeing the first signs that things are slowing down.”

“Net mortgage borrowing while strong at £4.3bn in October is down on the September figure of £4.9bn, which could indicate would-be buyers are concerned they won’t make the stamp duty holiday deadline of March 31, due to the pressure on the system.’

“With no sign that the Government is going to review or extend the deadline, now more than ever people need to look at alternative ways to finance their property purchase.”

“High street lenders may be struggling to meet the timescales demanded by investors and home-buyers, but specialist lenders are able to move more quickly to get the deal over the line to benefit from the SDLT holiday.”