£2.4bn debts paid during lockdown
HOUSEHOLDS managed to pay off £2.4billion of debt in January, Bank of England figures have revealed.
With so many shops, restaurants and other outlets temporarily shut, people have had fewer ways to spend money.
Yesterday’s data showed those lucky enough to have spare cash continued to reduce debts, a trend seen throughout the pandemic.
The outstanding amount of consumer credit has fallen below £200billion for the first time since mid-2017.
It dropped at 8.9 per cent – the fastest rate since records began in 1994.The main reason for January’s decrease was a £2.2billion fall in credit card borrowing, with the outstanding level of debt on plastic the lowest for eight years. Households also saved another £18.5billion, despite the pitiful rates offered by most banks and building societies. While it is good for people’s finances to cut their borrowing, that means less money is being spent in the economy. Experts predict those with spare money will splash the cash when restrictions are eased. Josie Dent, managing economist at the Centre for Economics and Business Research, said: “A significant proportion of households have seen their incomes protected through government support programmes such as the furlough scheme.
“But spending opportunities have been dramatically curtailed amid lockdowns.”
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “The average figures look promising, but averages always hide an awful lot of suffering.
“There are those who have been managing on lower incomes for months and are really struggling.”
The Bank of England said 99,000 mortgage approvals were made in January. Small firms borrowed an additional £500million that month, some in order to survive.