Customers hit by the economic downturn of the pandemic have been granted almost 1.5m payment holidays on credit cards and personal loans by lenders, according to an industry body.
As of May 21, nearly 880,000 customer accounts had been given a payment freeze on their credit cards and another 608,000 customers received holidays on personal loan payments, according to UK Finance, the banking trade body. These figures for successful applications are 26 per cent higher than those at the start of May for credit cards and 30 per cent up for personal loans.
In total, UK Finance members deal with almost 9m personal loan and 51m credit card accounts.
“Banks and building societies will continue to help their customers get through the crisis and have a wide range of support available,” said Stephen Jones, chief executive of UK Finance. “Anyone with concerns about their financial situation should check with their lender to discuss which form of support would be the best choice for them.”
Arrangements for payment holidays started in March and allow a customer to make no monthly repayment for three months without being considered in arrears. The facility to freeze payments to lenders was offered as part of a plan agreed between the banking sector and government to help cushion the blow to many customers’ incomes created by the coronavirus lockdown.
In addition to such payment holidays, lenders have also offered interest-free overdraft of £500 on more than 27m bank accounts.
The announcement comes days after UK Finance revealed lenders have approved 1.8m mortgage payment holidays up to May 20, corresponding to about one in six of UK mortgages.
The trade body also reported its members have issued more than £27.5bn of loans to over 650,000 small businesses through government Covid-19 lending schemes.
The economy shrank 5.8 per cent in March compared with the previous month, according to official figures released earlier this month. The contraction is expected to be double-digit in April. The government on Wednesday said 8.4m people have been furloughed by their employers during the pandemic.
While economic activity is slowing picking up with the relaxation of lockdown, any path to recovery is expected to be prolonged and well exceed the three months of the repayment holidays.
For mortgage payment holidays, the Treasury and financial regulators have announced that those in need would be permitted to defer it for another three months.
For payment holidays on other products, UK Finance urged financially distressed customers to “contact their lender to understand what further support might be available”.