Households repay £377m in consumer credit

3rd June 2021

Latest Bank of England (BoE) figures show that consumers continued making net repayments of consumer credit in April 2021.

The figures show that households collectively made a £377 million net repayment in consumer credit, the repayment figures included credit cards, personal loans and overdrafts.

Analysis shows that while people have been making significant net consumer credit repayments since the first lockdown in March 2020, April’s net repayment was lower than the average £1.7 billion that has been paid back each month over the past year.

The amount of cash in bank accounts rose by £10.7 billion in April. The fact this is far lower than the figures recorded in recent months suggests people are starting to spend more as the economy reopens, with a 9.2% rise in retail sales over the month also suggesting this may be the case.

The figures also showed that mortgage borrowing fell back in April from the record high seen in March. Net mortgage borrowing totalled £3.3 billion in April, down from £11.5 billion in March. April’s total was also lower than the £5.7 billion monthly average for the six months to February. The decline in April follows a rush to snap up homes the month before, with buyers looking to complete transactions before the end of the stamp duty holiday, with the tax break originally expected to conclude in March but now extended to June.

The BoE figures also show that the number of mortgage approvals increased in April, hitting 86,900 compared to 83,400 in March. Considering the impact of the stamp duty holiday and possible market activity in the coming months.

Commenting on the figures Jonathan Barrett, Co-Founder & CEO of clinical tech provider, Comentis said “The recent data reveals that many individuals are still struggling to meet their credit payments. Slight increases on 2020 will be down to government initiatives implemented to support those most financially impacted by lockdowns, but such schemes may only be creating problems for the future, when, without such support, these customers will become exposed and financially vulnerable.”

“With economic adversity comes vulnerability, and consumer credit providers have a responsibility to support these customers. The stress generated by spiralling debt and tarnished credit could have a knock-on effect on mental wellbeing. Providers will need to be able to spot the signs of vulnerability and poor mental health, so these customers are protected – however, the reality is this requires clinical expertise. Recent advancements in technology mean any regulated business, from financial advisers to credit providers, can now leverage digital tools that deploy real-time clinical data to make assessments so those at-risk are flagged.”

Charlotte Nixon, Mortgage Expert at Quilter, said “Mortgage borrowing cooled off considerably in April, down 72% on the previous month to £3.3bn after the rush to secure mortgage deals in March before it was expected that the stamp duty holiday would end. Now the tax holiday has been extended to the end of June, the stampede for property has calmed somewhat.”

“Standing at 1.88%, the effective rate on newly drawn mortgages is pretty low by historical standards which should help with affordability, particularly for first time buyers. But first-time buyer beware. After double digital house price growth, any price correction could send alarm bells ringing if it means the threat of negative equity looms.”

“The lockdown-driven accidental savings has continued once again, with a further £10.7bn deposited by households at banks and building societies in April. This is despite the fact that the interest received is meagre, at 0.47% on average. With inflation running well above this level, and expected to stay higher for some time during the economic reopening, savings deposited in current or easy access accounts may well be losing money in real terms.”

“Closely watched by economists and inflation hawks alike will be when the savings tide starts to turn to become a tidal wave of spending once restrictions end. With £5.5bn fewer savings in April than in March, it’s likely we have reached this turning point and fewer and fewer savings will be deposited as the months tick by.”

Whilst Richard Pike, Phoebus Software Sales and Marketing Director, said “The ‘Sold’ signs across the country are striking evidence of what can only be described as a booming housing market.  House prices are at their highest in seven years, but as demand increases supply is, as always, the problem.  Housebuilders are desperately trying to play catch-up, following the lockdown restrictions, to meet the government’s targets for new home development.  However, they now face supply issues of their own with a serious materials shortage caused by the pandemic and, of course, the Suez Canal incident.  This is having a serious knock-on effect with developments stalling as a consequence.”

“As ever the fluctuations in the housing market make it difficult to predict what will happen next, but it’s reasonable to expect things to continue in their current vein at least until the end of June.  Then we will see how much the stamp duty holiday has driven current activity.”