Rise in debt repayments continues to hit household budgets

A sharp rise in debt repayments was recorded in April as cost-of-living pressures continue to bite according to research by Nationwide.

The data showed that customers repaid unsecured debts of £735 million in April – a 25 per cent year-on-year rise, while the number of transactions to debt repayment increased by 14 per cent.

Many consumers have been using credit to help them deal with rising costs. On average those with a credit card are repaying £391 per month, while repayments to car finance are £267 and personal loans £195. However, it isn’t all bad news, with inflationary pressures easing, meaning some may find themselves in a better position to further reduce outstanding debts.

Nationwide’s Spending Report an analysis of more than 225 million debit card, credit card and Direct Debit transactions, shows c.£7.5 billion was spent overall in April. Spending overall was up two per cent compared to the previous year, while transactions were up one per cent. 

The amount of essential spending in April reached nearly £4.3 billion – up one per cent compared to the previous year, while the volume of transactions (115 million) was up two per cent. Housing continues to account for the biggest rises with renters seeing a 33 per cent increase, while mortgage repayments increased 18 per cent. However, there were falls in spending on utilities (-14%), discount stores (-12%) and supermarkets (-7%).

Meanwhile non-essential spending totalled £3.3 billion. Overall non-essential spending was up two per cent on last April while the number of transactions was flat (c.109.6m). Many people use catalogues to spread the cost of goods, with spend increasing 12 per cent last month to £966 million. Spending on health and beauty (+5%) and holiday and airline travel (+4%) also saw notable rises. However, there were falls on spending on dating (-21%), DIY & home maintenance (-15%), gardening (-8%) and clothing and shoes (-7%).

Mark Nalder, Nationwide’s Payments Strategy Director, said “Many households have turned to credit as a way of dealing with rising prices. While some are using it to spread the cost of luxury items, such as holidays, others are relying on credit to help pay essential bills. However, a 25 per cent rise in credit repayments should be looked at in the round. As much as some people will be relying more on their credit cards and loans at this time, a notable fall in essential costs such as energy bills and supermarket spend means others will be using the opportunity to repay more debt while they can. We would encourage anyone struggling with debt or worried about their finances to get in touch as we offer a range of tailored support for those facing financial difficulties.”