Money and Credit - October 2018

Published on 29 November 2018

Key points

Consumer credit increased by £0.9 billion in October, similar to the previous few months, but below much of the period since 2016.
Mortgage market activity was broadly stable in October. The flow of mortgage lending increased to £4.1 billion in October and mortgage approvals for house purchase were 67,000.
Net finance raised by businesses was strong at £5.8 billion in October, as both bank lending and bond issuance rose.

References in the text point to the summary tables below. For further statistics, please see our Bankstats tables.

Lending to individuals (Tables A-E)

Consumer credit (Tables B and C):

The net amount of new consumer borrowing, excluding mortgages, was £0.9 billion in October (Chart 1). Within this, net credit card borrowing was slightly lower than September, at £0.4 billion, while borrowing for other loans and advances was slightly higher at £0.5 billion. Since July, the net flow of consumer credit has averaged £1.0 billion, somewhat less than an average flow of £1.5 billion since early 2016.

The annual growth rate of consumer credit slowed further in October, to 7.5%, reflecting the weaker lending flows seen in recent months. This was the lowest since May 2015, and well below the peak of 10.9% in November 2016.

Chart 1: Consumer credit flows

Seasonally adjusted

Chart 1: Consumer credit flows

Mortgage lending (Tables D and E):

Mortgage market activity was broadly stable in October. Households borrowed an extra £4.1 billion secured against their homes in October, which was broadly in line with September but a little above the flows seen earlier in 2018. The annual growth rate of mortgage lending ticked up to 3.3% in October. It has been around 3% since late 2016, and remains modest compared to the pre-crisis period.

The number of mortgages approved for house purchase has been broadly stable for the past couple of years, and ticked up to 67,000 in October, the highest since January 2018 (Chart 2). The number of approvals for remortgaging was unchanged on the month at 49,000.

Chart 2: Mortgage approvals

Seasonally adjusted

Chart 2: Mortgage approvals

Lending to businesses (Tables F-I)

Businesses can raise money by borrowing from banks or from financial markets (in the form of bonds, equity and commercial paper). The total amount outstanding of businesses’ borrowing from these sources increased by £5.8 billion in October, following a fall of £1.9 billion in September. Within this, businesses borrowed an additional £2.6 billion from banks, the highest since July 2017. Net bond issuance was strong at £7.1 billion, partly due to merger and acquisition activity. Commercial paper issuance was also positive at £0.4 billion. There were net redemptions (where new issuance is offset by larger repayments) of funds raised through equity for the third month in a row, of £1.0 billion.

Chart 3: Net finance raised by PNFCs¹

Seasonally adjusted

Chart 3: Net finance raised by PNFCs1

The increase in bank lending to businesses was driven by lending to large businesses, which increased by £2.1 billion in October following a negative net flow of £2.0 billion in September. Bank lending to small and medium sized enterprises (SMEs) fell by £0.4 billion in October As a result the annual growth rate of lending to large businesses increased to 2.5% in October, while the growth rate for SMEs remained close to zero for the tenth consecutive month.

Broad money (Table J)

The total amount of money held by UK households, private non-financial corporations (PNFCs) and non-intermediary other financial corporations (NIOFCs) (Broad money or M4ex) increased by £6.0 billion in October. This was above the £3.8 billion average increase over the previous six months. Money held by households increased £2.1 billion, which is below the average of the past six months. Within this, non-interest bearing deposits fell £1.4 billion on the month. This was the first fall since February 2018, though it was partially offset by an increase in interest bearing sight deposits (deposits that can be accessed without penalty). Money held by PNFCs increased by £1.6 billion in October, whilst money held by NIOFCs increased by £2.3 billion.

¹ Please note, there may be sizeable discrepancies between the total net finance raised and its components due to the aggregate being seasonally adjusted separately to the components.

Summary tables