Consumer borrowing fell by a record 9.9 per cent in February, as the latest lockdown kept people – and their wallets – indoors.
According to the latest Bank of England money and credit statistics, individuals made £1.2bn in net repayments of consumer credit last month, down from £1.8bn in March. This represented the largest drop in borrower activity since records began in 1994.
Within consumer credit, the weakness on the month reflected £900m in net repayments on credit cards with £300m in repayments of other forms of consumer credit.
Consumers put £17.1bn into savings in February, down slightly since January, however this remains far higher than the average of £4.8bn in the six months before the coronavirus crisis.
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“Lockdown in February was just too miserable for us to sit tight and count our savings, so we loosened the purse strings a bit and invested in a few lockdown pick-me-ups,” said Sarah Coles, personal finance analyst of Hargreaves Lansdown.
“We repaid slightly less debt than in January and saved slightly less too. As the lockdown wore on through another cold and dark month, we decided to put our cash to good use and cheer ourselves – and our homes – up a bit instead.
“Retail sales figures from last week show we poured a small fortune into DIY and garden purchases, so we had a nicer four walls – or four fences – to stare at.
“However, we didn’t go overboard: savings still continued to build and we paid off large chunks of debt too. Consumer borrowing is down a record amount in a year; at almost 10 per cent.”
In February, net mortgage borrowing reached £6.2bn, the strongest since March 2016. There were 87,700 mortgage approvals for house purchases – higher than in February 2020, but a drop from a peak of 103,700 in November 2020.
This was supported by the expected ending of the temporary stamp duty holiday at the end of March. The strength on the month reflected higher gross lending of £27.7bn, close to the £27.9bn seen in March 2016.
Read more: Mortgage market remained strong in January
“It’s promising to see that the mortgage industry continued to show positive signs of recovery in February with net borrowing on the rise,” said Vikki Jefferies, proposition director at PRIMIS Mortgage Network.
“This is largely due to the Chancellor’s stamp duty holiday which has gone a long way towards stimulating buyer appetite.
“The market continues to work hard to progress with the influx of cases as a result of the recent extension to the tax cut but over the longer term, it will also have to deal with the growing number of borrowers who continue to face financial hardship due to the Covid-19.”