UK consumer credit rose to £2.5bn in August while mortgage approvals fell
Victoria Shinder1 min readThe Bank of England's Money and Credit release for August, published on 29 September, shows households borrowing more on cards and loans while the housing pipeline thinned.
Net mortgage approvals for house purchase fell to 54,900 from 55,900 in July, below the average of about 60,100 over the previous six months. Remortgaging approvals slipped to 34,000 from 34,600. Net mortgage borrowing rose to £4.4 billion from £4.1 billion but stayed below the six-month average of £5.2 billion, and annual growth in net mortgage lending held at 3.6%. The effective rate on newly drawn mortgages rose to 4.60% from 4.45%, and the rate on the outstanding stock to 4.00% from 3.97%.
Consumer credit moved the other way. Net borrowing rose to £2.5 billion from £2.1 billion, above the six-month average of £1.9 billion. Credit cards accounted for £1.2 billion, up from £0.9 billion, and other lending such as car finance and personal loans for £1.3 billion.
Companies returned to borrowing: private non-financial corporations raised a net £7.7 billion of finance after close to nothing in July, including £5.7 billion of bank loans after £0.9 billion of net repayments. The flow of sterling money, M4ex, swung to £16.2 billion from minus £9.8 billion, driven mainly by non-bank financial firms. Households put £4.4 billion into ISAs.
Why it matters
Rising rates on new mortgages and falling approvals point to a housing market cooling under higher borrowing costs, while consumer credit above its recent average suggests households are carrying more short-term debt. For the Monetary Policy Committee both matter: one shows tighter policy passing through, the other shows demand not yet giving way.