More than £7bn of consumer credit was repaid in April, representing the largest net repayment since the Bank of England started collating the monthly figures.
Households repaid £7.4bn of consumer credit in April, double the repayment in March, which was already a record high.
The majority (£5bn) of net consumer credit repayments were on credit cards, while £2.4bn of other loans were also repaid in April, according to the Bank of England’s latest statistics.
Brits have also reduced the amount they’re borrowing as gross borrowing fell to £11.8bn in April, roughly half its February level.
The BoE money and credit statistics also revealed that repayments on consumer borrowing has fallen 19% since February, reflecting the payment holidays associated with coronavirus.
It added that the annual growth rate of credit card lending was negative for the second month running, falling -7.8%, compared to 3.5% in February.
However, growth in other loans and advances remained positive at 3.1%, though this is much weaker than usual. In February, the growth rate was 6.8%.
The BoE revealed that overdraft borrowing also fell sharply in April as lenders removed overdraft fees and held rates low. The effective rate on overdrafts (including fees) was 11% in April, around 15 percentage points lower than in March.
But on the flip side, credit card borrowing rates rose 13 basis points to 18.5%.
Turning to consumer deposits held with lenders, the BoE said these increased strongly in April, by £16.2bn. In the six months to February 2020, household deposits rose by an average £5bn a month.
The majority of the increase was driven by interest-earning deposits. However, the interest rate paid fell 15 basis points in April to 0.98%. It also noted that £800m of savings were withdrawn from ISA accounts.
Laura Suter, personal finance analyst at investment platform AJ Bell, said lots of people are using lockdown to reduce their spending, shore up their savings and cut their debt in order to get their finances in better shape for the predicted recession to come.
She said: “The figures from the BoE 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.
“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.
“As a nation we saved £16.2bn in April, compared to the usual £5bn a month that was seen over the previous six months. However, savers who are putting more away have been hit with falling interest rates, with the average rate dropping by 15 basis points in April.”
Thomas Pugh, UK economist at Capital Economics said the deleveraging is much more rapid now than we saw during the global financial crisis when household borrowing growth didn’t fall until mid-2008 and never turned negative.
“Given the lockdown was only partially eased in May, we think that households probably continued to save and businesses borrowed more last month. Admittedly, stronger household balance sheets should mean that consumers are in a good position to start spending again once the lockdowns are lifted.