U.K. Consumer Credit Sinks to Record Low Amid Virus Lockdown

(Bloomberg) -- U.K. household borrowing plunged in April as the first full month of lockdown pummeled the economy.

Households on balance repaid 7.4 billion pounds ($9.3 billion) of consumer credit in April, the most since comparable records began in 1993, the Bank of England said Tuesday. The huge decline mirrored a record drop in retail sales during the month.

Meanwhile, the government-ordered closure of the housing market means that lenders granted the fewest home loans on record. The number of approvals dropped to 15,800.

While the lockdown to stop the spread of coronavirus is now starting to ease, the effective shuttering of the economy since March 23 has put Britain on course for its deepest recession for at least a century. The manufacturing sector continued to contract in May, and figures Tuesday showed house prices posting their biggest monthly drop since 2009.

The majority of repayments were of credit card debt, while the annual growth rate of such lending was negative for the second month running, contracting 7.8%. Growth in other loans and advances remained positive but weak.

With reduced opportunities to spend, households may be building up savings, potentially laying the ground for a sharp pickup in consumer spending and the housing market in 2021. The question is whether they confident about running down that margin once life returns to some normality.

©2020 Bloomberg L.P.