Money and Credit – August 2021



These monthly statistics on the amount and interest rates of loans and deposits of households and businesses are used by the Bank’s steering committees to understand economic trends and developments in the banking system.

Key points:

  • Individuals borrowed £ 5.3bn in net mortgage debt in August, after a net repayment of £ 1.8bn in July. Home purchase mortgage approvals fell further to 74,500 in August, from 75,100 in July.

  • The consumer borrowed an additional £ 0.4 billion of consumer credit, net. The effective rate on new personal loans remained below the January 2020 level at 5.87%, but was the highest since March 2020.

  • Household net inflows into deposit accounts rose in August to £ 9.1 billion. Interest rates on deposits fell again slightly to new historically low levels.

  • Large companies repaid £ 2.1bn in bank loans in August, while small and medium-sized businesses repaid £ 1.0bn. Private non-financial corporations repaid £ 1.1bn of net funding in the capital markets in August, compared to an average monthly net issuance of £ 2.8bn since March 2020.

References in the text refer to the summary tables below. For more statistics, please see our visual summaries, Statistical publication of effective rates (RE), Publication of statistics on capital issues and Banking statistics tables.

Loans to individuals

Mortgages (M&C Tables D and E):

Individuals borrowed £ 5.3 billion in mortgage debt, net, in August (graph 1). This follows a rare net repayment of £ 1.8bn in July. Net borrowing in August was £ 1.4 billion below the 12-month average until June 2021, when the full stamp duty holiday was in effect. Gross loans rebounded to £ 21.5 billion in August, from £ 16.6 billion in July. Gross repayments edged down to £ 17.6 billion.

Approvals for home purchases, an indicator of future borrowing, fell 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 consider remortgaging with another lender) rose to 39,700 in August. This remains low compared to the months up to February 2020, but it is the highest since March 2020.

Chart 1: Mortgages

Seasonally adjusted flows

“Effective” interest rates – the actual interest rates paid – on newly drawn mortgages fell 1 basis point to 1.82% in August. That’s a little below the January 2020 rate (1.85%) and the series average since March 2020 (1.83%). The rate on outstanding mortgage loans remained at a low level of 2.05%.

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

Individuals borrowed £ 0.4 billion of consumer credit in August. As part of this, they borrowed an additional £ 0.2bn from ‘other’ forms of consumer credit (such as car dealer financing and personal loans) and £ 0.2bn in credit card debt. (graph 2). On average, £ 1.2 billion of consumer credit was borrowed, per month, in the 2 years leading up to February 2020.

The annual growth rate of all consumer credit remained weak, but edged up 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 low at -7.9% and -0.1%, respectively.

Chart 2: Consumer credit

Seasonally adjusted

The effective interest rate on interest-bearing overdrafts rose 31 basis points in August to 20.66%, largely offsetting a decline in July. This series has fluctuated between 19.8% and 20.9% since September 2020. Rates on new personal loans to individuals rose 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, varying between 17.5% and 18.5% since March 2020.

Household 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 to banks and building societies of £ 8.5bn between April and July 2021 (Chart 3), and a serial peak of £ 27.5bn in May. 2020. The August flow is relatively strong compared to the pre-pandemic period. : In the year up to February 2020, the average inflow was £ 4.7 billion.

Graph 3: Household deposits

Seasonally adjusted net flow

The effective interest rate paid on new term deposits from individuals to banks remained at 0.29%, a low level. Effective rates on sight deposits and outstanding term deposits both fell 1 basis point to new series lows of 0.09% and 0.37% respectively.

Business loans and deposits

Business loans from banks (Table M&C FI):

UK non-financial corporations (PNFCs and state-owned enterprises) repaid £ 2.9bn in bank loans in August, compared with £ 3.5bn in net borrowing in July. This series has been volatile, varying between £ 8.3bn in net repayments and £ 4.4bn in net borrowing over the past 18 months. Large firms repaid £ 1.9bn in August, compared with £ 4.4bn in net borrowing in July. Small and medium-sized enterprises (SMEs) have repaid £ 1.0bn.

Large non-financial corporations have made net repayments for much of the past year, with an average repayment of £ 0.7 billion in the 12 months ending July 2021. The annual growth rate of borrowing of all large companies remained weak, at -1.8% in August, as a result. (Graph 4).

The average cost of new borrowing from banks by all PNFCs rose 48 basis points to 2.27% in August, after declining 59 basis points to 1.79% in July. The rate in August was above the average observed since March 2020, but lower than the rate for January 2020 (2.68%). The increase in August 2021 is explained by a 48 basis point increase in the cost of variable rate loans to 2.24%. Fixed-rate loan rates rose 21 basis points to 2.55%.

The net reimbursement by SMEs in August was £ 1.0 billion and is the largest on record (equal to March 2014), and it is the fifth consecutive month of reimbursement by SMEs. This follows an average net borrowing of £ 3.2bn per month between March 2020 and April 2021. With a very large borrowing in the first half of 2020 no longer having an impact on the annual growth rate, it has sharply fell from 25.9% in March to 1.4% in August. . Interest rates on new loans to SMEs rose 27 basis points to 2.74% in August, remaining above the average of 2.13% since March 2020, but lower than January 2020 (3.37% ).

Graph 4: Annual growth in loans to SMEs and large companies

Seasonally adjusted

Market finance (M&C Table F):

Private non-financial corporations (PNFCs) repaid £ 1.1 billion of market finance in August (Chart 5). In the twelve months leading up to July 2021, PNFCs raised an average of £ 1.2 billion. Equities and bonds both saw net repayments of £ 0.5bn, as well as net commercial paper repayments of £ 0.1bn in August.

Graph 5: Net financing raised by the PNFCsFootnote [1]

Seasonally adjusted net flow

Company deposits with banks:

In August, UK non-financial firms deposited £ 9.1 billion with banks in all currencies, on the net. This series can be volatile, with large movements such as £ 34.3bn in deposits and £ 15.8bn in withdrawals since January 2020. Effective rates on new term deposits and demand deposits on Shares for PNFCs remained broadly unchanged at very low levels in July, at 0.07% and 0.04%.

Global currency (M4ex) and loans (M4Lex) (M&C Table J)

The sterling currency (known as M4ex) rose by £ 10.3 billion in August, up from £ 7.0 billion in July but lower than £ 19.8 billion in June. Household money holdings continued to grow with net flows of £ 9.1 billion. The holdings of PNFCs (on a seasonally adjusted basis) increased by £ 2.1 billion.

Net sterling lending to private sector companies and households, or M4Lex, increased in August by £ 4.0 billion. This is a rebound from a drop of £ 13.9 billion in July. The increase was concentrated among households.

  1. There is a gap between the total net financing raised and its components due to the seasonal adjustment methodology

There is a gap between the total net financing raised and its components due to the seasonal adjustment methodology


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