The lockdown in November meant that more people could cut down on their spending, allowing them to pay off debt and build up their savings, latest figures from the Bank of England reveal.
Households repaid £1.5 billion of unsecured loans in November and there was a fall in new loans being taken out. This compares with £0.7 billion being repaid in October and £3.1 billion during March’s lockdown, according to the Bank of England. Since the beginning of March, households have repaid £17.3 billion of consumer credit.
This increased figure may be due to much of the UK being under tight restrictions (Tier 3 or Tier 4) at the time, therefore enabling people to cut down on spending and afford to pay off more debt.
However, there is a huge difference between those still maintaining a regular salary (who have managed to save and pay off debt this year) and those who have had their incomes impacted by the pandemic.
Households increase their savings
Interestingly, households also managed to save £17.6 billion in November, even though interest rates for savings were at historically low levels.
The effective interest rate paid on new deposits with banks fell to 0.5% in November and remains much lower than in February, when it was 1.04%.
The increase in November was up from £12.7 billion in October and similar to the average flow between March and June of £17.5 billion a month. Consumers did, however, take out significant amounts of money from National Savings & Investment (NS&I) accounts, withdrawing £6.2 billion.
The combined flow into both deposits and NS&I accounts was stable between September and November at around £12 billion, compared with an average of £21.7 billion between March and June.
Could you pay off debts in the new lockdown?
If you're lucky enough to still have a steady income at the moment, now is a good time to look at drilling down debts and saving more.
Below are five ways to do this:
- Create a budget and track your spending.
- Pay off the most expensive debt first.
- Pay more than the minimum balance each month
- Transfer debt to 0% balance transfer credit cards
- Stop impulse buys – ask yourself do I need to buy it and can I afford it.
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