UK banks granted 1.5m payment holidays on credit cards and loans
Britain's high street banks have granted almost 1.5m payment holidays to consumers struggling to repay their credit cards and personal loans during the coronavirus pandemic.
Figures released by the banking lobby group UK Finance show that 877,800 credit card accounts had been given a payment freeze by 21 May. Monthly repayments on 608,000 personal loans had been put on pause by that date.
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Against a backdrop of job losses and wage cuts for millions of workers across the country, the threat of financial hardship for UK households is rising dramatically.
Almost one in five people experienced a reduction in household income during the first full month of lockdown in April, according to estimates from the Office for National Statistics. The number of people claiming for unemployment benefits surged by almost 70% to reach about 2.1 million, in an early sign of rising job losses across Britain.
Payment holidays
are being offered for up to three months on credit cards and loans under guidelines published by the Financial Conduct Authority, the City watchdog. Mortgage repayment holidays can also be requested up until the end of October, with about 1.8m approved so far.
The latest snapshot suggests that relatively few people have been granted payment holidays so far - possibly because the government jobs furlough scheme is helping to maintain family incomes. Less than 2% of the 51m credit card accounts in Britain are on pause and less than 7% of loan payments frozen.
But UK Finance said the number of payment holidays was rapidly rising, growing by more than a quarter from the start of May.
Carl Packman, head of corporate engagement at the Fair By Design campaign, which works to promote fairer lending to consumers, said payment holidays urgently needed extending to support struggling households.
"Banks and their regulator moved exceptionally fast to provide clarity and support to customers during this time but unfortunately we anticipate the situation getting worse before it gets better.
"So the FCA will need to extend its support package for consumers and ensure against unintended consequences."
Household debt on credit cards and loans and car finance had been rising before the coronavirus struck. Damon Gibbons, director of the Centre for Responsible Credit.