Credit repayments at strongest rate since 1994

Households made net repayments on products such as credit cards, personal loans and overdrafts at the strongest annual rate in 27 years in February, Bank of England figures show.

With people paying back more than they borrowed, consumer credit borrowing fell by 9.9% annually – marking a new low since records started in 1994, the report said. Within the total, credit card borrowing shrank by 21% over the year to February, also marking a new low.

During February, people made a total net repayment of £1.2 billion of consumer credit, which the Bank said was a slightly smaller net repayment than the average of £1.8 billion made since March 2020.

Howard Archer, chief economic adviser to EY

Item Club said: “The overall slowdown in consumer credit growth had originally been significantly affected by weaker private car sales, which reduced demand for car finance.

“February’s figures are within scope of the third national lockdown, which is limiting consumer activity. Retail sales volumes were down 3.7% year on year in February, while private new car sales declined 37.3% year on year in February.”

In a further sign of household caution, people continued to deposit significant amounts into savings and other accounts, with an additional £17.1 billion placed in February. But the returns being earned were low. The Bank said deposit interest rates remained at historically low levels.

Meanwhile, mortgage borrowing strengthened in February, with people borrowing an additional

£6.2 billion secured on their homes.