Overview
These monthly statistics on the amount of, and interest rates on, borrowing and deposits by households and businesses are used by the Bank’s policy committees to understand economic trends and developments in the banking system.
Key points:
- Individuals borrowed £5.3 billion of mortgage debt on net in August, following a net repayment in July of £1.8 billion. Mortgage approvals for house purchase ticked down further to 74,500 in August, from 75,100 in July.
- Consumer borrowed an additional £0.4 billion in consumer credit, on net. The effective rate on new personal loans remained below the January 2020 level at 5.87%, but was the highest since March 2020.
- Households’ net flow in to deposit accounts increased in August, to £9.1 billion. Deposit interest rates fell slightly further, to new historically low levels.
- Large businesses repaid £2.1 billion in loans from banks in August, whilst small and medium sized businesses repaid £1.0 billion. Private non-financial companies redeemed £1.1 billion in net finance from capital markets in August, compared to a monthly average net issuance of £2.8 billion since March 2020.
References in the text point to the summary tables below. For further statistics, please see our visual summaries, Effective Rates (ER) statistical release, Capital Issuance statistical release and Bankstats tables.
Lending to individuals
Mortgage lending (M&C Tables D and E):
Individuals borrowed £5.3 billion of mortgage debt, on net, in August (Chart 1). This follows a rare net repayment of £1.8 billion in July. The net borrowing in August was £1.4 billion below the 12 month average to June 2021, when the full stamp duty holiday was in effect. Gross lending bounced back to £21.5 billion in August, from £16.6 billion in July. Gross repayments fell a little to £17.6 billion.
Approvals for house purchases, an indicator of future borrowing, ticked down in August to 74,500 from 75,100 in July. This is the lowest since July 2020, but remains above pre-February 2020 levels. Approvals for remortgaging (which only capture remortgaging with a different lender) rose to 39,700 in August. This remains low compared to the months running up to February 2020, but is the highest since March 2020.
Chart 1: Mortgage lending
Seasonally adjusted flows
The ‘effective’ interest rates – the actual interest rates paid – on newly drawn mortgages ticked down 1 basis point to 1.82% in August. That is a little below the rate in January 2020 (1.85%) and the series average since March 2020 (1.83%). The rate on the outstanding stock of mortgages stayed at a series low of 2.05%.
Consumer credit (M&C Tables B and C):
Individuals borrowed £0.4 billion in consumer credit in August. Within this, they borrowed an additional £0.2 billion of ‘other’ forms of consumer credit (such as car dealership finance and personal loans), and £0.2 billion in credit card debt (Chart 2). On average, £1.2 billion of consumer credit was borrowed, per month, in the 2 years to February 2020.
The annual growth rate for all consumer credit remained weak, but increased slightly to -2.4% in August from -2.6% in July. The annual growth rates of credit cards and other forms of consumer credit also remained weak at -7.9% and -0.1%, respectively.
Chart 2: Consumer credit
Seasonally adjusted
The effective interest rate on interest-charging overdrafts in August increased by 31 basis points to 20.66%, mostly reversing a decrease in July. This series has varied between 19.8% and 20.9% since September 2020. Rates on new personal loans to individuals increased by 2 basis points, to 5.87% in August, the highest since March 2020 (6.43%). The cost of credit card borrowing was 17.89% in August, having varied between 17.5% and 18.5% since March 2020.
Households’ deposits (M&C Table J):
Households deposited an additional £9.1 billion with banks and building societies in August. This compares to an average net flow into banks and building societies of £8.5 billion between April and July 2021 (Chart 3), and a series peak of £27.5 billion in May 2020. The August flow is relatively strong as compared to pre-pandemic: in the year to February 2020, the average inflow was £4.7 billion.
Chart 3: Households’ deposits
Seasonally adjusted net flow
The effective interest rate paid on individuals’ new time deposits with banks remained at 0.29%, a series low. The effective rates on sight deposits and the outstanding stock of time deposits both ticked down 1 basis point to new series lows, at 0.09% and 0.37% respectively.
Lending to and deposits from businesses
Businesses’ borrowing from banks (M&C Table F-I):
UK non-financial businesses (PNFCs and public corporations) repaid £2.9 billion in loans from banks in August, compared to £3.5 billion net borrowing in July. This series has been volatile, having varied between £8.3 billion in net repayments and £4.4 billion of net borrowing in the past 18months. Large businesses repaid £1.9 billion in August, compared to £4.4 billion of net borrowing in July. Small and Medium sized enterprises (SMEs) repaid £1.0 billion.
Large non-financial businesses have been making net repayments for much of the past year, averaging £0.7 billion repayment in the 12 months to July 2021. The annual growth rate of borrowing by all large businesses remained weak, at -1.8% in August, as a result. (Chart 4).
The average cost of new borrowing from banks by all PNFCs increased 48 basis points to 2.27% in August, having decreased 59 basis points to 1.79% in July. The rate in August was above the average seen since March 2020, but below the rate in January 2020 (2.68%). The increase in August 2021 was driven by a 48 basis points increase in the cost of floating-rate loans to 2.24%. Rates on fixed-rate loans increased by 21 basis points to 2.55%.
The net repayment by SMEs of in August was £1.0 billion and is the largest on record (equal with March 2014), and is fifth month in a row of repayments by SMEs. This follows average net borrowing of £3.2 billion per month between March 2020 and April 2021. With very strong borrowing in the first half of 2020 no longer impacting the annual growth rate, it has fallen sharply from 25.9% in March to 1.4% in August. Interest rates on new loans to SMEs increased by 27 basis points to 2.74% in August, remaining above the average of 2.13% since March 2020, but below January 2020 (3.37%).
Chart 4: Annual growth of lending to SMEs and large businesses
Seasonally adjusted
Market Finance (M&C Table F):
Private non-financial companies (PNFCs) redeemed £1.1 billion in market finance in August (Chart 5). In the twelve months to July 2021, PNFCs have raised an average of £1.2 billion. Equity and bonds both saw net redemptions of £0.5 billion, as well as £0.1 billion net redemptions of commercial paper in August.
Businesses’ deposits with banks:
In August, UK non-financial businesses deposited £9.1 billion with banks in all currencies, on net. This series can be volatile, with large movements such as £34.3 billion in deposits and £15.8 billion in withdrawals since January 2020. The effective rates on new time deposits and stock sight deposits for PNFCs remained broadly unchanged at very low levels in July, at 0.07% and 0.04%.
Aggregate money (M4ex) and lending (M4Lex) (M&C Table J)
Sterling money (known as M4ex) increased by £10.3 billion in August, up from £7.0 billion in July but below £19.8 billion in June. Households’ holdings of money continued rising with net flows of £9.1 billion. PNFCs’ holdings (on a seasonally adjusted basis) increased by £2.1 billion.
Sterling net lending to private sector companies and households, or M4Lex, increased in August, by £4.0 billion. This was a rebound from a decrease of £13.9 billion in July. The increase was concentrated among households.
There is a discrepancy between the total of net finance raised and its components due to the seasonal adjustment methodology
