Britons spent a little more, paid back a little less and tucked away a lot more last month, with savings increasing a record £25.6billion, figures from the Bank of England show.
It means households have stashed away a collective £56.6billion between March and May during the height of the coronavirus pandemic, the data reveals.
It comes as the furlough scheme, working from home and closure of vast swathes of the economy has turned many into accidental savers.
Households paid back £4.6bn more than they borrowed in May. Although still among record low levels, this is something of a rebound from April, when the figure was £7.4bn
Borrowing on credit cards and loans did increase slightly in May as VE Day, bank holidays and record sunshine helped consumer spending bounce back a little, but households still repaid £4.6billion more than they borrowed.
Meanwhile consumer borrowing figures suggested spending bounced back slightly last month, with new gross borrowing inching up from £11.8billion in April to £13.6billion in May, although this is still way down on the £25.5billion that was borrowed each month on average between August 2019 and February 2020.
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While many are able to tuck away more money and repay debts, others are struggling thanks to job losses or uncertainty.
Listen to our podcast: A tale of two lockdowns: Do you have more money to save or has it left you struggling?
This was previously hinted at in spending figures. Retail sales were 5.9 per cent lower in May compared to the same month last year, according to the British Retail Consortium and KPMG.
While still a fall, this was a smaller slump in retail sales than the 19.1 per cent seen in April, during the month of full lockdown.
This slight increase in new borrowing was coupled with households repaying less unsecured debt.
Repayments fell from £19.9billion in April to £17.7billion and meant how much households paid back compared to what they borrowed fell in May compared to the month before.
|Month||Amount owed on credit cards||Monthly change||Monthly percentage change||Annual percentage change|
|Source: Bank of England (seasonally adjusted data)|
Households had previously paid back a record £7.4billion more than they borrowed in April, according to the Bank of England, £5billion of which was on credit cards.
‘The smaller net repayment compared to April reflected a small increase in gross borrowing and lower total repayments’, it said.
That repayments are down could be due to payment holidays on credit cards and loans, with more than 1.65million three-month freezes taken by the end of last month.
But after three months where billions more was paid back than borrowed, Britain’s consumer debt pile now sits at £207.2billion.
This is 3 per cent smaller than it was last May, the largest year-on-year fall since records began in 1994.
Consumer debt repayments fell from £19.9bn in April to £17.7bn in May. This could be down to payment freezes on credit cards and loans, which have been taken by more than 1.65m people
Andrew Hagger, founder of personal finance site Moneycomms, put the slight bounce back in new borrowing and spending down to people having more time on their hands and jobs to do.
He said: ‘I think initially when the coronavirus crisis took hold people were staying indoors and not venturing out, but as time has gone on and people have had time on their hands and money coming in, thanks to furlough, some have been undertaking home and garden DIY tasks.
‘I know on a personal front I’ve just ordered a new garden shed.
‘When I first enquired in February the delivery time was one to two weeks, now it’s around three months.
‘I spoke to the shed company and they said orders have gone through the roof in the last couple of months, I rang round a few other companies to see if I could get one any earlier, but no joy.
‘All were snowed under with orders.’
This is Money has previously reported a similar craze for hot tubs, with many vendors selling out during the three months of lockdown as those stuck at home looked for an alternative way to enjoy record May sunshine.
But although the suggestion consumer spending is rebounding is good news for the economy, debt charities warned the figures showing billions in debt was cleared for the third successive month were not the full story.
StepChange’s director of external affairs Richard Lane said: ‘The economic effects of coronavirus are amplifying the problems for poorer and more financially vulnerable households, which is the worrying aspect that the aggregate data doesn’t show.
‘Our research suggests that around a quarter of all households have been negatively affected financially, and that over £6billion of debt directly attributable to the pandemic has been built up among over 4million people.
‘It’s crucial that public policy recognises the need for exit strategies that give those affected a safe way out of financial difficulty.’
There is also the issue of whether those who may need to borrow if they are made redundant in the next few months are able to do so cheaply.
Although the Bank of England said the cost of consumer credit fell in May, the number of interest-free credit card deals available is at record lows and cards aimed at riskier or poorer borrowers have had their APRs hiked.
Andrew Hagger added: ‘It’s how this all unfolds over the remainder of 2020 that will be interesting.
‘How many on furlough will be made redundant, and how many will be able to afford, loan and card repayments if this happens.
‘And those in work may feel their jobs are less secure and feel less inclined to spend and keep a cash buffer just in case.’
Top savings deals
While households are tucking away more money for a rainy day, the rates on offer are consistently shrinking.
But, despite the low interest on offer, it is still important to get into the savings habit – and it appears many are now doing just that.
Here are the top rates in our independent best buy savings tables:
Easy-access: NS&I Income Bonds – 1.15 per cent
Notice account: BLME 90-day notice – 1.1 per cent
Regular savings account: Coventry Building Society – save up to £500 a month – 1.85 per cent
One-year: Al Rayan Bank – 1.11 per cent
Two-year: Al Rayan Bank – 1.41 per cent
Easy-access (without a catch): Cynergy Bank – 0.9 per cent
One-year: Metro Bank – 0.9 per cent
Two-year: Metro Bank – 1 per cent