UK households paid off a record £7.4bn ($9.3bn) of debt in April during the coronavirus lockdown, according to the Bank of England data on household debt, released on Tuesday.
Brits paid off £5bn in credit card debt alone in April, more than double the record £2.4bn paid off in March.
“The figures from the Bank of England show that as a nation we paid off £5bn in credit card debt in the past month, more than double the record £2.4bn we paid off in March and far ahead of the usual £300m that’s paid off each month. However, we still have a long way to go with £64bn left to pay off on credit cards,” said Laura Suter, a financial analyst from the trading platform AJ bell.
She added: “The lockdown has created a divide in the country, with some households seeing cuts to income, job losses or being furloughed, while others are seeing their finances benefit from an enforced halt to much of their spending. Our own research* showed that 70% of people have saved money in lockdown, as they have cut the cost of their commute, going out and have reduced the cost of their bills.”
But other economists generally consider this as good news, as stronger household balance sheets results in a higher willingness from shoppers to spend money on goods and services, which benefits the UK’s consumer-driven economy.
The FTSE 100 was trading 1% above yesterday’s closing price at 6,228.82 during afternoon stock trading, as investors continue to bet on a quick economic recovery. The country’s reopening efforts have contributed to a surge in the index during the past 30 days, as reflected by the 8.2% gain the benchmark has seen during that period.
Also today, the BoE reported that mortgage lenders approved the lowest number of applications since the Bank of England started tracking their activities in 1997, as only 15,848 mortgages were approved during April, roughly 80% less than the number of approved applications in February.
“This is consistent with the market almost completely disappearing during April,” JP Morgan economist Allan Monks said. “However, the easing of restrictions last month and our tracking of high-frequency indicators points to a partial recovery in house purchase activity from May and into June.”