The consumer credit market remained weak while the mortgage market performed well last year, Bank of England data shows.
The bank’s consumer money and credit data revealed that in December consumers made net repayments of £1bn, following £1.5bn in November. This reflects weak net repayments on credit cards (£800,000) and other forms of consumer credit (£100,000).
Total net repayments were £16.6bn in 2020, the weakest in one year on record.
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Meanwhile, the mortgage market remained strong in December with individuals borrowing an additional £5.6bn secured on their homes, broadly unchanged from November.
The number of approvals for house purchases– an indicator for future lending – reached 103,400 in December, down slightly from 105,300 in November, but still well above the February’s 73,400.
Elsewhere, net borrowing by small- and medium-sized enterprises increased from £1.4bn in 2019 to reach a record £43.3bn in 2020.
Large businesses made net repayments of £5.8bn in 2020 compared to net borrowing of £13.8bn in 2019.
Household deposits increased by £20.9bn in December, the strongest since May while business deposit flows strengthened at £15.8bn.
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“You wouldn’t guess there was a devastating international crisis in 2020 simply by looking at consumer banking activity,” said Laith Khalaf, financial analyst at AJ Bell.
“All the dials suggest it was a great year for personal finances in the UK. Mortgage approvals were at their highest level since 2007, consumers paid down a record amount of debt, and at the same time saved almost £100bn more in cash than last year.”
Khalaf added that the overall reduction in consumer debt, combined with high levels of cash savings, and pent-up demand for holidays, meals out and other leisure activities, could be “an explosive powder keg that will help drive the economy when it finally opens up again.”