Consumers have continued to repay their debts at a record level throughout October, as they continued to focus on paying down existing debts rather than taking out additional loans.
During October, people managed to repay their unsecured balances – such as overdrafts, personal loans and credit card debts – by £579m, the largest contraction since 1993 when the Bank of England started recording figures in this way.
It was also only the sixth time on record that consumer credit repayments have outstripped new borrowing.
This was driven by strong repayments on both loans and overdrafts, with additional borrowing on these falling by £713m throughout the month. However, lending on credit cards almost doubled, rising by £134m.
There was also another sharp fall in the amount of money held in building society savings accounts. October saw £1.24 billion more money withdrawn from savings accounts than was paid into them, the eighth month in a row where this happened.
Adrian Coles, director-general of the Building Societies Association, said: “There is little incentive for people to increase savings whilst the Bank rate remains at its current low level, and many may opt to repay debt instead.”
Ivan Cooper, Chairman at debt advice experts Chiltern, said: “The amount held in savings has fallen consecutively over the last eight months which is quite worrying, as it indicates that people may be eating away at them just to get by.
“But the worry is what happens when people’s savings run out? There is the possibility that they could develop debt problems if they continue to spend more than they earn.”
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