BoE Money and Credit stats – insights

Will North, director of core credit at TransUnion in the UK, comments on the latest Bank of England Money and Credit statistics and TransUnion’s own findings as it tracks the impact of the current pandemic on consumer credit.

“The Bank of England’s most recent statistics on Money and Credit highlight the turmoil brought about by COVID-19. Mortgage approvals for buying a house were at their lowest level since March 2013. Borrowing was at an all-time high of £55.3 billion, although this does not reflect the decline in applications seen in the latter half of the month, which we’ll see in April’s figures. Gross lending was £5.4 billion weaker than in February, while repayments were £1.3 billion lower.

“Due to the weak net flows of consumer credit, the annual growth rate fell to 3.7% in March – the lowest since June 2013. For credit card lending, the annual growth rate dropped to -0.3%, the lowest figure recorded, whilst for other loans and advances, the annual growth rate fell to 5.6%.

“This picture is not unexpected. Here at TransUnion we’ve been tracking the impact of the pandemic on consumer credit* and have found that three out of five UK households have been negatively impacted by COVID-19; a figure that has remained largely unchanged since our study commenced on 23 March. Of those impacted, two thirds (67%) are worried about paying bills; with utilities, rent and credit cards topping the list, in that order. In this environment, it’s unsurprising that house purchases are no longer a priority as consumers adapt to an unprecedented economic shock.

“Millennials (those born between 1980 and 1994) appear to be feeling the financial stress more than most and this is not specific to the UK. Our global survey, which spanned seven regions of five continents, found that that three in four millennials (76%) worldwide indicated their household incomes have been negatively impacted by the pandemic. This compares to 64% for all other generations.

“So what lies ahead, given such levels of uncertainty? As we wait for news on when and how the lockdown will end, we’re told that the UK has now passed the peak of the infection. Will that also be true for the financial shock? The April figures will provide more insight into the impact but the repercussions will reverberate well beyond.

“There are positive indications, however, that the financial relief measures offered by the government and finance providers to ease the burden are working – at least for the short-term – whilst our research highlights the resilience of consumers as they put plans in place to address their changing circumstances. Looking at the longer-term picture, lenders need to engage with their customers to support them through this time, as we all work together to navigate our way through this challenging period.”

*TransUnion’s Financial Hardship Study, conducted in the UK 23 March – 13 April 2020.