Official figures revealed today that Britons borrowed more on credit cards, loans and overdrafts last month than in July and saved less, amid fears that household finances are under increasing pressure.
About £21.3bn was borrowed by consumers in August, up from £20.9bn in the previous month, although repayments increased slightly, as borrowing and spending continued to return to near pre-coronavirus levels.
But the increase in the amount borrowed last month, after the country paid back more than it borrowed for four consecutive months between March and June, comes as data from the Office for National Statistics suggests a growing number of Britons are finding themselves in financial difficulty.
Holidays to pay on bills such as credit cards, loans and mortgages are set to expire which could exacerbate the financial distress.
The Office for National Statistics has found that more people are having to use savings to cover their costs of living or are turning into debt, while record amounts saved over the past few months have slowed.
Survey data published at the beginning of this month found that there had been no improvement in households’ ability to pay unexpected bills and save for the next year since the beginning of July, while some people’s financial condition worsened.
By the end of July, 36 per cent of those surveyed said they would not be able to save for next year and a third would not be able to pay an unexpected £850 bill.
The proportion of people unable to pay the bill is now at levels last seen in late April, having risen from 26 percent in mid-June.
‘The trend of deteriorating financial resilience of the population in general continued into early August,’ the Office for National Statistics said, and by the end of July more than one in five parents were having to borrow money or use credit more often than they did before the pandemic. Corona Virus. .
The latest figures published last week found that of a fifth of Britons who said their finances had been affected by coronavirus between 16 and 20 September, nearly a quarter had to use savings to cover the cost of living, and 29 per cent were unable to save. And, as usual, about a fifth had to borrow or resort to credit to survive.
All of these factors have increased compared to the same period in mid-August.
Peter Totton, Head of Policy at StepChange Debt Charity, said: ‘BoE data showing people continued to borrow more than they paid back on consumer credit in August is just the latest indication that not everyone is experiencing the same effects in these difficulties. days.
“Our research has clearly shown that the most stressed families resort to additional borrowing to make ends meet.”
Recent research from the Office for National Statistics suggests that the financial situation of households began to deteriorate in July, with an increase in the proportion of people unable to save or pay an £850 bill.
Nearly four in five people who came to StepChange last month owed at least one credit card, up six percentage points in June.
About 15 per cent of those who applied to the charity cited coronavirus as the cause of their debt, and 17 per cent said it was because they had lost their jobs, although the total number of people needing counseling was down by 11,000 compared to August. last year.
Britons saved record amounts of money and wiped a collective £9.4 billion off their credit cards between March and June as the coronavirus lockdown left people unable to spend and government support schemes backed millions of income.
But this honeymoon period, which has seen the country become a nation of “casual savers,” appears to be coming to an end as fears loom that millions may be left unemployed and hundreds of thousands forced to return to making credit cards. , Loan and mortgage payments with the end of the payment holidays.
Data from Experian, one of the three largest credit reference agencies in the UK, found that there was a 16 per cent increase in credit card applications between May and August, and another 16 per cent increase between August and September 16.
There was also a 30 percent jump in loan applications over the same three-month period, while in August there was a 37 percent increase in the number of people checking their eligibility for credit cards, loans or auto financing compared to the same period. Last month.
The amount consumers borrowed on credit cards, overdrafts and loans rose again in August, but households also paid back more, meaning the net amount borrowed fell to £0.3 billion.
The figures again suggest that consumers are once again starting to borrow, with the benchmark agency previously finding that £14.99 a month Credit Expert customers cleared nearly £2,000 of debt between 23 March and 8 June as they found themselves with more income. Spendability.
Those who need to turn to credit to make ends meet also face the problem of the high cost of borrowing.
While the Bank of England found credit card rates barely budging last month, the number of interest-free cards available is near record lows.
There are only 52 zero-percent balance transfer cards and 50 interest-free purchase deals available today, according to Moneyfacts, down from 76 and 70 at the start of this year, respectively.
A July survey of lenders by the bank also indicated that lenders would be less keen to extend consumer credit between July and September.
Meanwhile, average overdraft rates jumped to a record high of 19 percent last month, after British banks imposed new borrowing fees of up to 40 percent, having previously delayed their introduction following directives from the Financial Conduct Authority to support borrowers during a pandemic. .
|week||% reported reduced income due to the coronavirus||% using savings to cover living costs||% Unable to save as normal||The percentage of borrowing or using credit to make ends meet|
|12 – 16 August||59%||18%||25%||15th%|
|16 – 20 September||65%||29%||29%||19%|
|Source: National Statistics Office|
|Month||The amount owed on credit cards||monthly change||Monthly percentage change||Annual percentage change|
|January||72.1 billion pounds sterling||£0.2bn||0.2%||4.3%|
|Walk||£69.3bn||-2.4 billion pounds sterling||-3.3%||-0.3%|
|April||64.1 billion pounds sterling||-5.0 billion pounds sterling||-7.2%||-7.8%|
|July||£62.3bn||0.6 billion pounds sterling||1%||-10.6%|
|Source: Bank of England (seasonally adjusted data)|
Jane Tully, director of external affairs at Money Advice Trust, the charity that runs the National Debtline and Commercial Debtline, said: ‘At National Debtline we hear from people who have real concerns about the future, as they try to deal with their immediate problems. Financial situation.
Many are concerned about recurrence, and we hear from a lot of people who have already fallen behind on household bills as a result of the outbreak.
We’ve seen the government take bold steps to support jobs and wages, and that — along with payment holidays on credit cards, loans and mortgages — has helped shield many families from the full economic impact of the outbreak.
We now need more action to help people who are in arrears on a range of household bills – including interest free loans to help people make their rent payments, changes to the mortgage interest subsidy scheme and an urgent overhaul of the way council tax is collected.
“I would encourage anyone concerned about their finances to seek free debt advice as soon as possible.”
Rebound mortgage borrowing
While consumer credit borrowing remains below pre-coronavirus levels, BoE figures find that mortgage borrowing has recovered more quickly.
About 84,700 approvals were registered to buy a home, the highest number since October 2007, although the total number approved this year is still 106,000 fewer than last year after the housing market shut down during the coronavirus lockdown.
In total, £3.1bn was borrowed last month, up from £2.9bn in July, but still below the pre-coronavirus average of £4.2bn.
‘The market remains exceptionally busy even though it’s no longer first-time buyers who drive things, it’s the second and subsequent movers of homes,’ said Andrew Montlake, managing director of mortgage broker Coreco.
First time buyers have been decimated by changes in the appetites of mortgage lenders, with few products available at 90 percent LTV remaining and income multiples becoming ever more conservative.
“People with decent equity in equity, secure jobs and looking to move away from cities for bigger homes and more space due to the new work-from-home culture are the ones who can best benefit from a stamp duty holiday.”
That’s five money from the best credit cards
Some of the links in this article may be affiliate links. If you click on it, we may earn a small commission. This helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to influence our editorial independence.