UK consumer borrowing at record low, but mortgages hit 13-year high
UK credit card and other consumer borrowing fell at its fastest rate ever, just as mortgage borrowing hit its highest level in 13 years.
New Bank of England (BoE) data Monday illustrates a stark contrast in borrowing trends fueled by the coronavirus pandemic.
Households have paid off 5.6 billion pounds ($ 7.5 billion) in credit cards, overdrafts, car financing and other consumer debt since March. The crisis has heightened consumer concerns about their finances, while the virus and foreclosure restrictions have dramatically reduced spending opportunities.
Average overdraft interest rates also jumped earlier this year, with the BoE reporting an effective rate of 19.7% in October from 10.3% in March.
Consumer debt has fallen 5.6% in the past year, the lowest since the central bank started recording the data in 1994. £ 400million has been repaid in credit card debt in October alone.
Households are also putting more money into banks. Deposits totaled £ 12.3 billion in October, the highest since May.
“The strong flow of deposits in October can be explained by deposits in instant access accounts,” the bank said in its latest monthly household finance analysis. He noted that the deposits may reflect savers’ abandonment of National Savings and Investment Accounts (NS&I), after cutting the highest interest rates in the market.
As households held back on consumer borrowing, mortgages have skyrocketed in recent months after falling when Britain’s first foreclosure crippled the housing market.
The pandemic and the months of lockdown have sparked a rush to return for those who can buy, fueled by stamp duty cuts in England and Northern Ireland.
The latest figures show that 97,500 loans were approved for the purchase of homes in October. This is an increase from September’s record 92,100 approvals, which was also the highest level since 2007.
It marks a 33% jump from pre-lockdown levels in February. Some real estate agents are reporting lender delays as banks struggle to keep up with growing demand for their services.
Mortgages from various lenders were unchanged in October, however, down 40% from February levels.
October’s data on money and credit showed that the mini-boom in the housing market has continued, but a decline in consumer credit suggests that consumer spending was already faltering before the tax was imposed. foreclosure, ”said Thomas Pugh, UK economist at Capital Economics.
Pugh noted, “Overall, households started saving money again in the fourth quarter, which will weigh on spending.
“But as consumers and businesses are paying off the credit now, the good news on vaccines means businesses and consumer handbags could be pretty full when regulations are relaxed early next year, resulting in a sharp rebound in consumption and GDP growth. “
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