Brits stop borrowing from their banks as covid lockdowns shut shops

Borrowing from banks and credit cards plunged in April as people stayed in during the lockdown.

Official figures showed households were paying off far more than they borrowed from their banks and lenders and depositing near-record amounts of cash with their banks. That fall came despite a sharp fall in repayments of loans as consumers hit by wage cuts from covid-19 took repayment holidays.

After an all-time record £67.3 billion increase in deposits in March, April's rose £37.3 billion.

The Bank of England, which published the figures, said: "Households and private businesses have been repaying loans from banks but corporates have accessed significant funds."

Households repaid a net £7.4 billion of consumer credit- the largest net repayment since records began and double that of March, which was the previous record.

That was despite interest rates falling, making credit cheaper in April than March as effective rates on overdrafts fell 15 percentage points and floating rates on mortgages falling by 46 basis points as the Bank cut the cost of borrowing.

For businesses, the interest rate paid on new borrowing fell by 10 basis points, with larger falls for SMEs.

The Bank said: "Households have reduced the amount they are borrowing in consumer credit as spending has fallen with Covid-19."

Repayments on consumer borrowing, however, have fallen 19% since February as those hit by the virus's economic impact took payment holidays.

The data represent a double-edged sword for banks. Dramatic falls in lending may indicate risk levels declining as we head into recession, but also the difficulty in making a profit when fewer people are willing to borrow.

Mortgage lending

Mortgage borrowing crashed as the housing market was brought to a standstill in the lockdown. The number of home loans approved for house purchases crashed 80% on February's levels to 15,800 in April - half the lowest levels seen in the global financial crisis.

Approvals for remortgaging were less impacted as some householders took advantage of the lower interest rates. they fell to 34,400, down 34% on February levels.