Money and Credit - August 2022

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 UK banking system.

Key points:

• Net borrowing of mortgage debt by individuals increased to £6.1 billion in August, up from £5.1 billion in July, and remaining above its 12-month pre-pandemic average up to February 2020 of £4.3 billion.
• Mortgage approvals for house purchases increased sharply to 74,300 in August from 63,700 in July. This is the highest level since January 2022 (74,500), and a notable rise following a downward trend over the previous several months.
• The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages increased by 22 basis points to 2.55% in August.
• Consumers borrowed an additional £1.1 billion in consumer credit, on net, a little below the additional £1.5 billion borrowed in July.
• Non-financial businesses borrowed £7.7 billion of bank loans in August, the highest flow of borrowing since April 2020. Private non-financial companies (PNFCs) redeemed £1.4 billion in net finance from capital markets.
• The net flow of sterling money (known as M4ex) decreased to £4.0 billion in August, from £17.2 billion in July. Households deposited an additional £3.2 billion with banks and building societies in August, compared to £3.9 billion in July.
• The effective interest rate paid on individuals’ new time deposits with banks and building societies rose to 1.94% in August from 1.72% in July.

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):

Net borrowing of mortgage debt by individuals increased to £6.1 billion in August, from £5.1 billion in July (Chart 1). This is above the pre-pandemic average of £4.3 billion in the 12 months up to February 2020. Both gross lending and gross repayments were little changed at £25.4 billion and £20.4 billion, respectively.

Approvals for house purchases, an indicator of future borrowing, increased sharply to 74,300 in August, from 63,700 in July, and above the 12-month pre-pandemic average up to February 2020 of 66,800. This is the highest level since January 2022 (74,500), and a notable rise following a downward trend over the previous several months. Approvals for remortgaging (which only capture remortgaging with a different lender) also continued to increase, to 49,400 in August from 48,400 in July. This is close to the pre-pandemic average in the 12 months up to February 2020 of 49,500.

The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages increased by 22 basis points to 2.55% in August. The rate on the outstanding stock of mortgages increased by 5 basis points, to 2.17%.

Consumer credit (M&C Tables B and C):

Individuals borrowed an additional £1.1 billion in consumer credit in August, on net, following £1.5 billion of borrowing in July (Chart 2). This remained above the 12-month pre-pandemic average up to February 2020 of £1.0 billion. The additional consumer credit borrowing in August was split between £0.7 billion on credit cards, and £0.4 billion through other forms of consumer credit (such as car dealership finance and personal loans).

The annual growth rate for all consumer credit remained at 7.0% in August; the highest rate since March 2019 (7.2%). The annual growth rate of credit card borrowing was also unchanged at 12.9%, the highest since October 2005 (13.7%). The annual growth rate of other forms of consumer credit was little changed at 4.5%.

Rates on new personal loans to individuals decreased by 5 basis points to 6.84% in August, but remained close to the February 2020 (pre-pandemic) level of 6.90%. The effective rate on interest bearing credit cards increased to 18.66% in August, and sits above the February 2020 level of 18.55%. The effective interest rate on interest-charging overdrafts in August increased to 20.46%, from 19.90% in July.

Households’ deposits (M&C Table J):

Households deposited an additional £3.2 billion with banks and building societies in August, compared to £3.9 billion in July. Within the household deposits measure, flows into time deposits remained positive, but weakened to £0.8 billion in August from £2.9 billion in July. Flows into interest bearing sight deposits increased slightly from £0.5 billion in July to £0.8 billion in August. Flows into non-interest bearing sight deposits were £1.1 billion, the same as in the previous month. During August, households also deposited £1.1 billion into National Savings and Investment (NS&I) accounts (compared to £0.3 billion in July); these are not captured within household deposits with banks and building societies, but can act as a substitute for them. The combined net flow into both deposits and NS&I accounts in August was unchanged at £4.3 billion, remaining below the average monthly net flow of £5.5 billion during the 12-month pre-pandemic period up to February 2020 (Chart 3).

The effective interest rate paid on individuals’ new time deposits with banks and building societies rose from 1.72% in July to 1.94% in August. The effective rate on the outstanding stock of time deposits increased by 7 basis points to 0.70% in August. The effective rates on stock sight deposits rose 5 basis points to 0.32%.

Lending to and deposits from businesses

Businesses’ borrowing from banks (M&C Tables F-I):

UK non-financial businesses (PNFCs and public corporations) borrowed £7.7 billion of bank and building society loans in August (including overdrafts), on net, compared to £2.0 billion of repayments in July. This is the highest flow of borrowing since April 2020 (£15.8 billion). Within this, large non-financial businesses borrowed, on net, £7.7 billion in August, compared to £1.7 billion of repayments in July. Net repayments by Small and Medium sized non-financial businesses (SMEs) reduced to net zero in August, from £0.3 billion net repayments in July.

The annual growth rate of borrowing by large businesses increased by 2.8 percentage points to 8.2% in August, whilst for SMEs it rose by 0.3 percentage points to -4.3% (Chart 4).

The average cost of new borrowing from banks by UK PNFCs increased 17 basis points to an effective interest rate of 3.35% in August, and now sits 79 basis points above the February 2020 rate of 2.56%. Effective interest rates on new loans to SMEs increased by 53 basis points to 4.15% in August, remaining above February 2020 rates (3.44%).

Market Finance (M&C Table F):

Private non-financial companies (PNFCs) redeemed net £1.4 billion of market finance (the sum of net equity, bond and commercial paper issuance) in August (Chart 5), in comparison to £3.3 billion redeemed in July. Within this, on net, companies bought back £2.3 billion of equity in August, but issued £0.2 billion and £0.7 billion of bonds and commercial paper respectively.

Businesses’ deposits:

In August, UK non-financial businesses deposited £13.3 billion, on net with banks and building societies in all currencies, compared to net withdrawals of £11.4 billion in July.

The effective rate on new time deposits increased by 28 basis points to 1.55%, which is the highest since December 2008 (2.01%) and the effective rate on stock sight deposits increased by 14 basis points, to 0.46%.

Aggregate money (M4ex) and lending (M4Lex) (M&C Table J)

The flow of sterling money (known as M4ex) decreased to £4.0 billion in August, from £17.2 billion in July. Flows of PNFCs’ holdings of money increased to £4.4 billion from £0.1 billion in July.

The flow of sterling net lending to private sector companies and households, or M4Lex, decreased to £3.7 billion in August. This was lower than the £10.8 billion of lending in July.

Queries

If you have any comments or queries about this release please email DSD_MS@bankofengland.co.uk.

Next release date: 31 October 2022