Explanatory Notes - Total lending to individuals
OVERVIEW
AVAILABILITY
SOURCES
DEFINITIONS
VALUATION AND BREAKS
FURTHER INFORMATION
OVERVIEW
Lending to individuals consists of sterling lending secured on dwellings (i.e. mortgages) and sterling consumer credit to UK-resident individuals, as well as all sterling lending to housing associations. In addition to data collected on the value of loans secured on residential property, this data set also includes information on the number and value of approvals for lending secured on dwellings, which are broken down by purpose of the approvals (i.e. for house purchase, remortgaging and other purposes). The consumer credit component is broken down into credit card and ‘other’ lending (covering overdrafts and other loans/advances).
Data are available quarterly from 1987 Q1 and monthly from April 1993. The data are available not seasonally adjusted and seasonally adjusted. Publication of data will usually occur on the 21st working day of the end of the period in the Lending to individuals statistical release and in Table A5 in Monetary and Financial Statistics (Bankstats) or subject to the published schedule of releases.
SOURCES
Sterling lending to individuals is provided by three main types of lender:
- UK-resident banks; a sample of UK-resident banks report monthly data directly to the Bank of England on the forms BE, IS, IC and IO. The forms collect additional sectoral data and further analysis of certain items of lending to UK residents respectively. Prior to October 2007, these data were collected on the form Q1D.
Gross advances and approvals data for lending secured on dwellings are reported by a sample of banks which account for about 95% of total bank lending secured on dwellings. Net lending secured on dwellings is reported by a sample of banks accounting for about 98% of total bank lending secured on dwellings. Banks’ credit card data are reported by a sample representing about 98% of total bank credit card lending and the ‘other’ lending data are reported by a sample representing about 97% of total bank ‘other’ lending. All these data are grossed up to provide estimates of lending by the whole banking population.
- UK-resident building societies; From January 2008, data from building societies are collected on the same basis as for UK-resident banks, on the forms BE, IS, IC and IO on a monthly basis (see the article on Transition of building society statistical reporting in the January 2008 edition of Monetary and Financial Statistics). Prior to this, data for building societies were collected by the Financial Services Authority. These figures were based on a sample of societies, which were grossed up to achieve full coverage of the building society population in the published data.
- Other specialist lenders; (non-bank, non building society UK credit grantors, specialist mortgage lenders, retailers, central and local government, public corporations, insurance companies and pension funds). Statistics relating to secured lending on dwellings are reported directly to the Bank of England on form MM, which collects data from specialist mortgage institutions on secured lending to individuals and individual trusts. Data on secured lending by other lenders are collected by the Office for National Statistics. Data on consumer credit provided by other specialist lenders, retailers, and other lenders are collected by the Office for National Statistics and the Student Loans Company.
All data are subject to revision if and when new information becomes available. For more information on revisions practices see the Explanatory Note on revisions, available here.
Lending to individuals comprises all sterling lending to the UK household sector excluding unincorporated businesses and non-profit-making institutions serving households, as well as all sterling lending to housing associations. The lending to individuals data differ from the M4 lending to individuals statistics, because the former include lending by institutions other than banks and building societies and lending to housing associations.
In order to bring their treatment into line with that in the National Accounts, housing associations were reclassified from non-profit-making institutions serving households in the household sector to private non-financial corporations in August 2005. But secured lending to housing associations remains included within lending to individuals.
Levels series are not adjusted for breaks; however, some break-adjusted levels series are available on request.
Data for net acquisitions (positive) and disposals (negative) of mortgage and consumer credit portfolios by type of lender are published in Table A5.7 of Monetary and Financial Statistics (Bankstats) and on the Statistical Interactive Database. These series cover both loan transfers and securitisations. Table A5.7 should be used in conjunction with Table A5.3 (for net lending), when analysing the data by type of lending institution.
A securitisation occurs when a portfolio of loans is transferred to a UK-resident or a non-resident special purpose vehicle (SPV), which funds the purchase of the portfolio through the issue of bonds or other securities. When a portfolio of loans is disposed of (or acquired) by an institution in the UK, without the issue (or redemption) of bonds or other securities to fund the purchase, it is known as a loan transfer for statistical purposes. Securitisations and loan transfers to UK residents are recorded in Table A5.7, but any securitisations or transfers to non-residents are only footnoted in Table A5.
Further detail is provided in an article in the November 2004 edition of Monetary and Financial Statistics (Bankstats) “Impact of securitisations and loan transfers activity on M4 Lending” by Lorna Hall.
LENDING SECURED ON DWELLINGS
Lending secured on dwellings includes secured lending to individuals and all lending to housing associations. The data are collected on a monthly basis and include gross lending, net lending and approvals by value and number.
Gross lending figures refer to the total value of loans advanced by institutions in a given period. Repayments and other adjustments are excluded.
- Banks’ gross lending excludes bridging loans, but since figures for gross lending to housing associations are not available, only net advances to housing associations are included.
- Building societies’ gross lending excludes bridging loans (from January 2008), but since figures for gross lending to housing associations are not available, only net advances to housing associations are included. Prior to January 2008, gross lending comprised loans fully secured on residential property and other loans fully secured on land to individuals and housing associations. Prior to October 1998, this was defined as Class 1 and Class 2 sterling lending to individuals and housing associations excluding mortgage portfolios acquired by UK building societies.
Class 1 lending: referred to sterling advances made by UK building societies to UK individuals where the advances are secured on dwellings for the purchase of property; in addition, a Class 1 advance has to be the first charge on the property.
Class 2 lending: referred to sterling advances made by building societies to individuals or housing associations, secured on dwellings other than by a first charge. May include lending not for the purchase of property, but excludes bridging loans.
- Other specialist lenders’ lending includes loans fully secured on residential property to housing associations from March 1999. From January 2008, second charge mortgages are excluded from other specialist lenders’ secured lending data.
Net lending figures refer to gross lending less repayments and other adjustments (e.g. for bad debt write-offs). Net lending figures reflect the impact of acquisitions/disposals of mortgages or consumer credit portfolios (see Acquisitions of mortgages and consumer credit portfolios) and include sterling bridging loans made by banks and other specialist lenders from April 1993, and by building societies from January 2008. Monthly data on banks’ net lending to housing associations prior to July 1996 have been derived by interpolating quarterly observations and using the quarterly pattern of building societies’ lending. Quarterly data after July 1996 are the sum of monthly observations.
Repayments include repayments of principal broken down into full redemptions, partial redemptions and all other repayments of principal. Interest payments are excluded from these data. The breakdown of repayments of mortgage principal for banks is available from October 1997, and for building societies from September 1992.
Approvals are the firm offers of lenders to advance credit secured on specific dwellings to their customers. This is the total agreed advance, irrespective of whether the mortgage offer has been accepted by the customer. The number and value of approvals are reported net of cancellations (where an approval has been made previously, but not taken up and the outstanding approval has been cancelled).
A breakdown of the value and number of approvals by purpose is available for banks from October 1997, for other specialist lenders from January 1999 and for building societies from January 2001. For further details of these changes see the Supplementary Notes in the May 2001 edition of Monetary and Financial Statistics.
Prior to January 2008, the value of building society approvals referred to sterling loans to individuals fully secured on residential property and other loans fully secured on land (previously Class 1 and 2 sterling lending (i.e. including some approvals to private non-financial corporations)). The number of building society approvals measured only approvals for sterling loans secured on residential property.
Approvals secured on dwellings are broken down into three types:
- ‘House purchase’ covers approvals that are fully secured on residential property by a first mortgage. It includes existing borrowers transferring their existing mortgage to another property, lending to first-time purchasers and lending for buy-to-let purposes.
- ‘Remortgaging’ occurs when existing borrowers redeem their current mortgage in favour of a new one secured on the same property, but with a different mortgage lender.
- ‘Other lending’ occurs when existing borrowers increase the size of their current mortgage, with the same lender. It includes any loan secured on residential property which is used for home improvement, car purchase etc.
CONSUMER CREDIT
Consumer credit is defined as borrowing by UK individuals to finance current expenditure on goods and/or services. Consumer credit is split into two components; credit card lending and ‘other’ lending (mainly overdrafts and other loans/advances). Charge card lending can sometimes be indistinguishable from credit card lending; in these cases it is included in data for credit card lending.
- Banks’ lending includes sterling credit card lending and sterling overdrafts and other unsecured sterling loans and advances to individuals. Banks’ net lending includes an estimate of sterling items in transit and suspense that relate to this lending.
- Building societies’ lending includes sterling credit card lending, sterling overdrafts and other unsecured sterling loans and advances to individuals. Prior to January 2008, building societies’ lending was unsecured lending to individuals including sterling bridging loans (prior to October 1998 this was class 3 lending to individuals). Building societies gross lending through overdrafts is no longer included from January 2008.
- ‘Other consumer credit lenders' comprise non-bank credit grantors and specialist mortgage lenders extending consumer credit and loans through Government student support schemes (currently through the Student Loans Company). Retailers’ consumer lending occurs where funding is provided direct to the individual (not via an intermediary). Figures relate to hire/purchase agreements and other forms of credit (such as sales on budget accounts, credit sale agreements and personal loans repayable by instalments), but exclude monthly accounts and sales on bank or building society credit cards. Insurance companies’ figures include outstanding premiums.
Lending secured on dwellings
From April 1993, the definition of bank ‘lending for house purchase’ changed to cover all lending which is fully secured by a first charge on a residential property; thus it corresponded more closely to ‘Class 1’ lending by building societies (more details are available on pages 316-317 of the August 1992 Quarterly Bulletin). The net effect was to boost lending for ‘house purchase’; the net lending figures were, however, adjusted to exclude the estimated effect of this redefinition. The amount of outstanding bank lending to individuals which is secured on dwellings but not included in the above definitions totalled at least £853mn at end-1995, £1,051mn at end-1994 and £1,269mn at end-1993 (the figures may not be comprehensive). This series, for example, includes some lending arising from schemes such as specialised ‘mortgage equity extraction’ products.
In April 2004 a population review of other specialist mortgage lenders was undertaken (for more information see Bank of England: Monetary and Financial Statistics article 'Population Review for Other Specialist Mortgage Lenders').
Approvals
Prior to October 1997, banks’ value and number of approvals are gross of cancellations and exclude approvals for other purchases. Following the Banking Statistics Review, from October 1997, all approvals are reported net of cancellations and breakdowns of approvals for house purchase, remortgaging and other purposes are available. For further details on these changes, see Bank of England: Monetary and Financial Statistics article ‘Mortgage market statistics’.
Due to the revisions to the definitions of bank approvals in October 1997 there is a break in the published (bank and aggregate) approvals series from this date. Aggregate data from October 1997 are therefore not directly comparable with those for earlier periods.
The series for other specialist lenders’ number of loans approved for house purchase is available from January 1999. Consequently, both the other specialist lenders’ series and the total series from January 1999 are not directly comparable with earlier periods. For further details of these changes see the Supplementary Notes in the May 2001 edition of Monetary and Financial Statistics.
Consumer credit
From November 2006, the Bank of England ceased to update the separate data on consumer credit provided by other specialist lenders, retailers, and insurance companies, previously contained in Table A5.6 of Monetary and Financial Statistics. The final month for which separate data are available on the Bank's Statistical Interactive Database is November 2006. The three categories have been merged into “other consumer credit lenders”.
Within total consumer credit outstanding, credit card lending had been underestimated and ‘other’ consumer credit overestimated prior to January 1999 as a result of a longstanding inconsistency. The credit card element had previously covered sterling credit card lending to the UK household sector by only UK banks and building societies. Credit card lending by other specialist lenders and retailers (where they finance lending themselves) could not be separately identified and so was included within the ‘other’ consumer credit component.
From January 1999 onwards the inconsistency described above has been corrected, as credit card lending by other specialist lenders can be separately identified. As a result, data from January 1999 onwards for credit card lending and for ‘other’ consumer credit are not directly comparable with those for earlier periods. The change affects all three measures of credit card lending (gross, net and amounts outstanding), with an equal offsetting change to ‘other’ consumer credit. In not seasonally adjusted terms, gross credit card lending was on average around £800 million per month higher since January 1999, whilst the amount outstanding of credit card debt was boosted by £4.8 billion in January 1999. The changes to net credit card lending are much smaller in absolute terms, with no discernible change to trend.
Some bank data on gross lending do not cover precisely the same loans as the net lending data. To make the data comparable, the gross lending data have been scaled accordingly.
Following an ONS review, data for ‘other specialist lenders’ were improved and revised back to January 1995. Total outstanding consumer credit was revised (in August 1997) upwards by £2.6bn. Flows were break adjusted.
Monthly data are available for lending by retailers from January 1997 but are not available for lending by insurance companies. The missing monthly data have been interpolated from quarterly data.
Building societies
Building societies' statistical reporting transitioned from the Financial Services Authority to the Bank of England on 1st January 2008, and some minor changes to the calculation of lending to individuals have been implemented. The effects of these have been removed from the flows data, and are small in terms of the amounts outstanding.
- Cheltenham & Gloucester Building Society joined the Lloyds Bank Group in August 1995.
- National & Provincial Building Society transferred its business to Abbey National plc in August 1996.
- Alliance & Leicester Building Society converted to public limited company status in April 1997.
- Halifax Building Society converted to public limited company status in June 1997.
- Woolwich Building Society converted to public limited company status in July 1997.
- Bristol & West Building Society joined the Bank of Ireland Group in July 1997.
- Northern Rock Building Society converted to public limited company status in October 1997.
- Birmingham Midshires Building Society joined the Halifax Group in April 1999.
- Bradford & Bingley Building Society converted to public limited company status in December 2000.
Other specialist lenders
In January 1998, Other Specialist Lenders were re-defined to exclude lending by institutions in the Channel Islands and Isle of Man, as these are now classified as non-residents. Flows have been adjusted for the change in sector; levels data however are not break-adjusted.
O’Connor, P (2008), ‘Transition of building society statistical reporting’, Monetary and Financial Statistics, January.
Hall, L (2004) ‘Impact of securitisations and loan transfers activity on M4 lending’, Monetary and Financial Statistics, November, pages 7-8
Hall, L (2004) ‘Population review of Other Specialist mortgage Lenders’, Monetary and Financial Statistics, April, pages 14-19
Senior, S (1998) ‘Mortgage market statistics’, Monetary and Financial Statistics, September, pages 3 5
