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During April, borrowing fell to £11.8bn, roughly half its February level, as consumers were unable to spend money on non-essential items during the Coronavirus lockdown, data released by the Bank of England this week reveals.
Although there has been a significant reduction in borrowing during the lockdown, data also shows that repayments on consumer borrowing have also fallen significantly, by 19%, reflecting payment holidays that were taken by those unable to afford their repayments during the lockdown.
While many households struggled financially during the lockdown, others found themselves with more disposable income, which a significant number used to repay debts. The data shows that there was double the repayment of consumer credit in April compared to March, with people repaying £7.4bn of consumer credit. The majority of this, £5.0bn, was used to make repayments on credit cards, while £2.4bn was used to make repayments on other loans.
For those who have had to take a payment holiday during the lockdown, or who are now struggling financially, mortgage payment holidays have been extended, with the application period ending on 31 October 2020. Saying this, it is advisable for those who are financially able to end their payment holidays as quickly as possible as interest is likely still being added to the debt, which could result in having to make larger monthly repayments once the payment holiday has ended, or extending the term of the repayment.
This week, the Financial Conduct Authority dismissed calls for mortgage payment holidays to be recorded on credit scores, which will be of some relief to borrowers. Those who have had to take a payment holiday should consider their finances and factor in the additional costs of taking the payment holiday into their monthly budget. For those who will continue to struggle financially once the payment holiday has ended, help and advice are available by contacting Citizen Advice or a free debt charity.
Consumers who have been in the fortunate position of having an increase in their disposable income during the lockdown can consider using the extra money to pay off debts. At the moment, savings rates are low, so while it might be tempting to put the money away, it could be more beneficial to focus on repaying debts such as credit cards instead provided a suitable emergency fund is in place. Switching to a 0% balance transfer credit card could be a good option for those with credit card debts, as it provides interest-free breathing room in which to repay the debt. However, being accepted for a credit card will depend on the individual’s credit score, which can be checked here.
Rachel Springall, finance expert at Moneyfacts.co.uk, said: “In a low interest rate environment, it would be a wise decision to chip away at debts with any additional disposable income. However, considering the Coronavirus pandemic’s influence on consumers’ daily lives, they might also wish to put away a rainy-day fund to fall back on during uncertain times. If it is indeed possible for consumers to minimise their unsecured debts and tidy up their finances, then they could well improve their financial footprint in the process. Driving down unsecured debts, especially those bearing interest, is a positive move to put consumers in a better position for when they may decide to take out a mortgage, whether being a first-time buyer or are just looking to re-finance onto a better deal. Now is a perfect time to check out the best deals and do a financial health check.”
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Inflation increased to 9% today following April’s announcement from the Office for National Statistics (ONS). It means inflation is now at its highest level since 1982. “Inflation rose steeply in April, driven by the sharp climb in electricity and gas prices as the higher price cap came into effect,” said Grant Fitzner, Chief Economist at ONS.
Inflation increased to 9% today following April’s announcement from the Office for National Statistics (ONS).
Lloyds Bank will incentivise any customers switching from another bank to its Club Lloyds or Club Lloyds Platinum Account with a £125 cash bonus. The offer is available with immediate effect and is only available through the Current Account Switch Service (CASS) until 27 June.
Lloyds Bank will incentivise any customers switching from another bank to its Club Lloyds or Club Lloyds Platinum Account with a £125 cash bonus.
In light of the ongoing cost of living crisis in the UK, it is likely that the word “affordability” is on your mind. Added to this, if you are approaching your 40s and 50s, you could be shouldering many financial responsibilities.
In light of the ongoing cost of living crisis in the UK, it is likely that the word “affordability” is on your mind.
Inflation increased to 9% today following April’s announcement from the Office for National Statistics (ONS). It means inflation is now at its highest level since 1982. “Inflation rose steeply in April, driven by the sharp climb in electricity and gas prices as the higher price cap came into effect,” said Grant Fitzner, Chief Economist at ONS.
Inflation increased to 9% today following April’s announcement from the Office for National Statistics (ONS).
Lloyds Bank will incentivise any customers switching from another bank to its Club Lloyds or Club Lloyds Platinum Account with a £125 cash bonus. The offer is available with immediate effect and is only available through the Current Account Switch Service (CASS) until 27 June.
Lloyds Bank will incentivise any customers switching from another bank to its Club Lloyds or Club Lloyds Platinum Account with a £125 cash bonus.
In light of the ongoing cost of living crisis in the UK, it is likely that the word “affordability” is on your mind. Added to this, if you are approaching your 40s and 50s, you could be shouldering many financial responsibilities.
In light of the ongoing cost of living crisis in the UK, it is likely that the word “affordability” is on your mind.
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