The Pandemic is Driving a Growing Financial Divide Within the UK

Will North, director of core credit at TransUnion in the UK, comments on recent data from the Bank of England:

“The latest Money and Credit statistics from the Bank of England reveal mortgage approvals for home purchases remained strong, with net mortgage borrowing for October at £4.3 billion and 97,500 mortgage approvals. This is the highest level since September 2007 and is likely fuelled by the stamp duty holiday which will carry on until March 2021. There have been recent reports of expected falls in property values next year in the wake of COVID-19 and the uncertainty around Brexit but initiatives such as the government’s pledge to build a million new homes in the next five years should help counter that in the longer term.

“There seems to be a picture emerging of an increasing financial polarisation within society. Those without reduced income have remained largely unaffected financially by the pandemic and are therefore better off and perhaps in a strong position to take advantage of schemes like the stamp duty holiday and pay off existing debt. Since the beginning of March, UK households have repaid £15.6 billion of consumer credit, and the October figures show this continuing, with net repayments of £0.6 billion.

“Meanwhile, many of those who have had an income shock via a reduced salary or unemployment are struggling. Our recent Financial Hardship Study report revealed that of those impacted, the number of people still worried about their ability to pay bills remains as high as it was at the start of the pandemic (70% in March versus 71% at the end of November) and that the second lockdown gave rise to renewed financial concern and may exacerbate this further.

“With Christmas just around the corner and unemployment likely to continue rising, there are further challenges ahead. Chancellor Rishi Sunak's recent announcement set out clear plans to stimulate the economy and protect jobs but whilst support such as the furlough scheme and payment holidays will continue through to March 2021, lenders need to be planning further down the line in terms of their customers’ financial needs. It’s vital that they have the necessary data, insight and tools at their disposal to identify individual financial circumstances and spot any early warning signs of financial stress.”



*TransUnion’s Financial Hardship Study is based on a series of surveys of 1000 UK consumers, carried out on behalf of TransUnion. Data compared from 23 March and 3 November 2020