Consumers Repaying More Debt As Financial Divide Grows

Will North, director of core credit for TransUnion in the UK, comments on the latest Bank of England Money and Credit announcement:

“In its latest Money and Credit statistics, the Bank of England has revealed that consumers repaid £2.4 billion of credit in January. This is the largest net repayment since May 2020 and a substantial increase on previous months, with consumers having repaid an average of £1 billion per month from September through to December 2020. Mortgage borrowing also remained strong at £5.2 billion in January, with 99,000 mortgage approvals for house purchases. The figures suggest the divide we’ve already seen emerging may well be growing, with the pandemic having impacted people financially in different ways.

“For those largely unaffected, their ability to repay more debt, thanks to lack of spending and consistent income, is strengthening their financial position. This is borne out by a recent reporti which stated that nearly a quarter (24%) of UK consumers have saved more money over the course of the pandemic so far. Similarly, our study tracking the impact of COVID-19 on consumer financesii found that 61% of households finished 2020 either where they expected to be financially or better off.

“At the same time, those affected by loss of income are worse off and in many cases utilising government support schemes and payment holidays just to get by. We found that half of households were still reporting a negative financial impact at the end of 2020 and four in 10 (41%) UK consumers overall were concerned about their ability to pay their bills.

“Lenders will need deeper consumer insights and best-in-class customer management approaches in order to understand their customers’ financial situations and to be able to make informed, responsible lending decisions. With the Financial Conduct Authority (FCA) estimating that over a quarter of UK adultsiii are demonstrating characteristics of vulnerability, lending is likely to be cautious.

“However, with the government publishing its roadmap for easing lockdown and the vaccine rollout continuing at pace, we can start to see the path to recovery, albeit an uncertain one. As we look forward with hope towards the summer, with the reopening of non-essential retail and the prospect of holidays – even if largely UK-based – we can start to think of the return to normal spending levels. In this new environment, finance providers need to be adapting their risk models and utilising the latest tools and data insights to take a dynamic approach to assessing their customers’ needs.”



i YouGov, Global Banking and Finance Report 2021

ii ii Based on a survey of 1,086 adults in the UK conducted 30 November 2020 on behalf of TransUnion

iii FCA: Financial Lives Survey, February 2021