By The Banks report can be seen here stating that the latest statistics on UK household and business borrowing and deposits offer insights into economic trends, with some key movements observed in August:
- Mortgage Debt: Net mortgage borrowing by individuals increased to £1.2 billion in August, marking four consecutive months of growth. However, net approvals for house purchases fell to 45,400 (the lowest in six months), while remortgaging approvals saw a steep decline to 25,000, the lowest since July 2012. Mortgage interest rates rose to an effective rate of 4.82%.
- Consumer Credit: Borrowing in consumer credit rose to £1.6 billion, primarily driven by personal loans and car dealership finance. The growth rate of consumer credit reached 7.6% annually, with credit card borrowing holding steady at 11.8%.
- Household Deposits: There were net withdrawals of £0.3 billion from banks, primarily driven by outflows from sight deposit accounts. However, inflows to time deposit accounts, although reduced, offset some of the losses. The effective interest rate on new time deposits rose to 5.12%.
- Business Borrowing and Repayments: Non-financial businesses repaid £0.9 billion in loans, with SMEs and large businesses both contributing to net repayments. The cost of new business borrowing increased, with the rate for SMEs rising to 7.65%.
- Market Finance and Deposits: Businesses saw net repayments in market finance, increasing to £4.9 billion in August. Conversely, UK non-financial businesses deposited £3.1 billion in banks.
In summary, while household mortgage borrowing rose, approvals and remortgaging saw significant declines. Consumer credit continued to expand, and interest rates increased across the board. Businesses showed cautious borrowing behaviour, with repayments and rising borrowing costs in focus.
Industry comments
Mark Harris, chief executive of mortgage broker SPF Private Clients, says: “Mortgage approvals for new purchases rose again, which bodes well for housing market activity in the final quarter. Remortgage approvals also picked up after a dip in July, suggesting a growing number of borrowers are drawn to ‘best buy’ rates offered by other lenders, rather than sticking with their existing provider.
“The effective interest rate paid on new mortgages edged up slightly to 4.84 per cent in August but with a Bank of England base rate cut, coupled with lenders reducing mortgage rates, we expect lower pricing to be reflected in next month’s data.”
Tomer Aboody, director of specialist lender MT Finance, says: “Higher borrowing levels and mortgage approvals in August further cement confidence in the market. Lower base rate, and subsequent mortgage rates, are convincing buyers who have been waiting to buy that now is the time.
“While we await the dreaded Budget, we can expect some caution but hopefully a further rate decrease will ignite the market again for a final push in 2024.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “A good way of establishing whether the recent housing market improvement is likely to be sustained is to look at mortgage approvals – and these figures are no exception.
“Following hard on the heels of the acceleration in house prices as reported by Nationwide, commitments to purchase are also climbing at their best rate for around two years.
“Buyers are emerging from summer hibernation to take advantage of cheaper mortgages with the prospect of more to come, as well as an increasingly-settled economic and political background.
“Looking forward, improved property choice and worries about the ‘painful’ Budget in just over four weeks means prices will not increase rapidly as part of an increasingly settled period.”
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