• People paid off £7.4bn of debt in April – a record
• Mortgage lending dropped 80% as housing market stalled
• People saved £16.2bn in April – more than triple usual amounts
Laura Suter, personal finance analyst at investment platform AJ Bell, comments on the latest Bank of England figures on household debt:
“Lots of people are using lockdown to reduce their spending, shore up their savings and cut their debt, in order to get their finances in better shape for the predicted recession to come. The figures from the Bank of England show that as a nation we paid off £5bn in credit card debt in the past month, more than double the record £2.4bn we paid off in March and far ahead of the usual £300m that’s paid off each month. However, we still have a long way to go with £64bn left to pay off on credit cards.
“The lockdown has created a divide in the country, with some households seeing cuts to income, job losses or being furloughed, while others are seeing their finances benefit from an enforced halt to much of their spending. Our own research* showed that 70% of people have saved money in lockdown, as they have cut the cost of their commute, going out and have reduced the cost of their bills.
“This is reflected in the Bank of England figures, which show that as a nation we saved £16.2bn in April, compared to the usual £5bn a month that was seen over the previous six months. However, savers who are putting more away have been hit with falling interest rates, with the average rate dropping by 15 basis points in April.
“Mortgage lending has plummeted, as the housing market stalled and a number of lenders restricted their offerings. There was an 80% fall in the number of new mortgages approved in April, compared to February – representing half the number seen in the depths of the financial crisis. Some people have been using their spare time to take advantage of falling interest rates and remortgage onto a cheaper product, but still the number of people remortgaging fell by 34% compared to February. This drop likely reflects the cut in the number of products available and the more uncertain finances of much of the nation.”
*Statistics based on nationally representative research of 2,002 adults in the UK by Opinium and AJ Bell.
