Record decline in borrowing

CONSUMER credit borrowing fell in October at the sharpest annual rate since figures started in 1994, according to the Bank of England.

In contrast to cautious households repaying consumer loans, the number of mortgage approvals made to home buyers in October was at the highest levels since 2007.

Non- mortgage borrowing – which includes credit cards, overdrafts and personal loans – fell by 5.6 per cent annually in October, marking a new low since the Bank’s data started in 1994.

Since the start of March, households have repaid a total of £ 15.6billion of consumer credit.

The Bank said that non- mortgage lending to consumers remained weak in October, with households making net repayments of £ 590million.

The weakness was driven by a net repayment on credit cards, the Bank said. Some £ 449million was repaid on credit cards in October.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “Households appear to be using the excess savings that they have accumulated this year to pay off debt, when loans come to be refinanced.”

He added that banks have also been restricting access to consumer credit, with the typical personal loan rate increasing to 5.15 per cent in October.

Meanwhile, 97,532 mortgages for house purchase were approved in October – the highest total since September 2007.

A temporary stamp duty holiday and the release of pent- up demand into the market after activity was put on pause earlier this year due to the coronavirus pandemic have helped boost sales, property experts have said. Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “With mortgage approvals at their highest level since September 2007, the market continues to be robust.

“But the circumstances are very different to 2007; back then, those highs were followed by the credit crunch but this time around there is far more scrutiny on mortgage underwriting and the assessment of affordability.”

‘ Households appear to be concentrating on paying off debt’