UK households rush to repay debt, mortgage approvals slump – BoE

LONDON (Reuters) – British consumers ramped up repayment of their debts and mortgage approvals slumped to the lowest on record in April as the country spent the month in the coronavirus lockdown, Bank of England data showed on Tuesday.

FILE PHOTO: Terraced houses are seen in Primrose Hill, London, Britain September 24, 2017. REUTERS/Eddie Keogh

Consumer credit figures showed a net repayment of 7.399 billion pounds ($9.28 billion), the biggest such repayment on record, as households worked off their credit card debts.

The BoE data showed consumer credit lending fell by 0.4% in the 12 months to April, the biggest drop since August 2012.

At the same time, the number of mortgage approvals fell to the lowest since comparable records began in October 1997 – 15,848, down from 56,136 in March which was already sharply lower than in previous months.

Earlier on Tuesday, mortgage lender Nationwide said Britain’s house prices fell by the most in more than 11 years in May.

“Given that the lockdown was only partially eased in May, we think that households probably continued to save and businesses borrowed more last month,” Thomas Pugh, an economist with Capital Economics, said.

“Admittedly, stronger household balance sheets should mean that consumers are in a good position to start spending again once the lockdowns are lifted. But we think that households savings will remain elevated for a while yet.”

The BoE data also showed net lending to businesses fell to 13.238 billion pounds in April, down by almost 20 billion pounds from March when companies rushed to get loans to see them through the pandemic crisis but still above average.

Britain’s government has promised 330 billion pounds’ worth of state guarantees for bank loans to businesses as part of its attempts to stave off a wave of bankruptcies.

Data published by the finance ministry on Tuesday showed small businesses have borrowed more than 21 billion pounds under a government-guaranteed coronavirus programme in May, well ahead of other lending support schemes.

The Treasury also said its wage subsidy scheme to soften a surge in unemployment now covered more than 8.7 million jobs and claims had passed 17.5 billion pounds.

A similar scheme for self-employed people had seen 2.5 million claims worth 7.2 billion pounds.

Reporting by William Schomberg, editing by David Milliken

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