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Households' net consumer credit repayments at strongest annual rate since 1994

Repayments on products such as credit cards, personal loans and overdrafts were made by UK consumers at their strongest rate last month since records began in 1994, according to the Bank of England
Repayments on products such as credit cards, personal loans and overdrafts were made by UK consumers at their strongest rate last month since records began in 1994, according to the Bank of England Repayments on products such as credit cards, personal loans and overdrafts were made by UK consumers at their strongest rate last month since records began in 1994, according to the Bank of England

HOUSEHOLDS across the UK made net repayments on products such as credit cards, personal loans and overdrafts at the strongest annual rate in 27 years in February, latest Bank of England figures show.

With people paying back more than they borrowed, consumer credit borrowing fell by 9.9 per cent annually - marking a new low since records started in 1994, the report said.

Within the total, credit card borrowing shrank by 21 per cent over the year to February, also marking a new low.

During February, people made a total net repayment of £1.2 billion of consumer credit, which the Bank said was a slightly smaller net repayment than the average of £1.8 billion made since March 2020.

Howard Archer, chief economic adviser to EY Item Club said: "The overall slowdown in consumer credit growth had originally been significantly affected by weaker private car sales, which reduced demand for car finance.

"February's figures are within scope of the third national lockdown, which is limiting consumer activity. Retail sales volumes were down 3.7 per cent year on year in February, while private new car sales declined 37.3 per cent year on year in February."

And in a further sign of household caution, people continued to deposit significant amounts into savings and other accounts, with an additional £17.1 billion placed in February.

But the returns being earned were low. The Bank said deposit interest rates remained at historically low levels.

Meanwhile, mortgage borrowing strengthened in February, with people borrowing an additional £6.2 billion secured on their homes.

This was supported by the expected ending of the temporary stamp duty tax relief at the end of March, which has now been extended to end of June, the Bank said.

Its report added: "February saw the strongest net borrowing since March 2016 (£7.2 billion), when borrowing was also boosted by changes in stamp duty."

Looking ahead to future mortgage borrowing, the Money and Credit report also showed the number of mortgages approved to home buyers totalled nearly 87,700 in February, edging down from 97,350 in January.