Households repaid £7.4 billion in credit card and loan debt in April as the Bank of England recorded the biggest ever monthly fall in consumer debt.
Lockdown effectively limited consumer activity in April, meaning that Britons borrowed less on plastic. This contributed to them paying off £5 billion in credit card debt and £2.4 billion of personal loans.
Overall, Britain’s credit card debt pile fell by 7.8% compared with the previous April.
While the total debt pile has fallen, repayments have actually dipped by 19% since February, reflecting the fact that many borrowers have sought payment holidays due to the coronavirus.
Other types of borrowing also fell as gross borrowing decreased to £11.8 billion in April – half of its February level. Net mortgage borrowing dropped to its lowest level since 2011 at £300 million. Mortgage approvals also fell to 15,800, compared with 56,100 in March and 73,700 before the pandemic started.
Tom Fox, Licensed Insolvency Practitioner at Umbrella Insolvency said: “Coronavirus and lockdown have impacted individuals differently. While some have been able to use the period to reduce spending, increase savings and cut debt, others have been hit hard by the virus.
“While payment holidays may provide some temporary respite for people in a sticky patch, it could push people into deeper debt trouble. Now, with recession looming large in the UK, the gulf between these two groups could become much larger.
“The picture for businesses is different, meanwhile. Collectively businesses borrowed more than £16 billion in an attempt to keep the lights on at a time when revenue has dried up. This could have a knock on effect for employees who, once government support ends, may take on debt to pay for everyday items.”
For more information and advice on personal insolvency solutions, speak to a member of the Umbrella.UK insolvency team today. Call: 0800 611 8888.