Money and Credit - August 2018

Key points

• Household borrowing growth moderated slightly in August. Annual consumer credit growth slowed to 8.1%, while secured lending growth ticked down to 3.1%. 
• The number of approvals for remortgaging, which has been volatile in recent months, increased to 53,125 in August.
• Net finance raised by private non-financial corporations (PNFCs) remained positive in August. Within this, net bank lending to businesses was positive, whilst finance raised through financial markets was negative.

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, increased slightly to £1.1 billion in August, up from £0.8 billion in July. Despite this increase, lending remains a bit lower compared to much of the past two years. This weakness reflects subdued net lending for other loans and advances (which includes personal loans, overdrafts and car finance), which increased slightly to £0.7 billion from £0.6 billion in July. Net credit card lending increased to £0.5 billion on the month, in line with the average of the previous 6 months.

The annual growth rate of consumer credit slowed further in August, to 8.1%, reflecting weaker monthly lending flows. The annual growth rate was the lowest since August 2015, and well below the peak of 10.9% in November 2016 (Chart 1). Within this, and consistent with lower monthly net flows over the past few months, other loans and advances growth fell to 7.7%, the lowest since December 2014. Credit card growth has been broadly stable for the past 18 months at close to 9%.

Chart 1: Consumer credit growth

Seasonally adjusted

Mortgage lending (Tables D and E):

Households borrowed an extra £2.9 billion secured against their homes in August. Net lending has been relatively stable over the past year or so, but this was the lowest monthly secured net lending since July 2016, and the annual growth rate ticked down to 3.1% in August. It has now been around 3% since late 2016, and remains modest compared to the pre-crisis period.

The number of mortgages approved for house purchase - which gives us an indication of how much new mortgage lending we might expect to see in coming months - increased to 66,440 in August (Chart 2). This was the highest level since January 2018, although approvals for house purchase have remained within a narrow range in recent years. The number of approvals for remortgaging - which could lead to an increase in gross lending and repayments, with little impact on net lending - increased to 53,125 in August. This data has been volatile recently, and this was the highest since November 2017.

Chart 2: Mortgage approvals

Seasonally adjusted

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 £3.2 billion in August (Chart 3). Within this, net finance raised from banks remained positive, but weak, at £1.0 billion. There were net redemptions of funds raised through financial markets, however, indicating that repayments were larger than new issuance on the month. There was a £0.9 billion net redemption of bonds, as well as £0.4 billion of commercial paper and £0.2 billion of equities.

Chart 3: Net finance raised by PNFCs¹

Seasonally adjusted

The annual growth rate of bank lending to non-financial businesses increased to 1.3% in August, but remains weak compared to the past two years. This was driven by higher growth in lending to large businesses, which rose to 2.1% in August up from -0.2% in July. The sharp increase reflected a base effect from a large increase in July 2017 washing out of the growth rate. Annual growth in lending to small and medium sized businesses remained close to zero for the eighth consecutive month.

Broad money (Table J)

The total amount of money held by UK households, businesses and non-intermediary other financial corporations (NIOFCs) (Broad money or M4ex) rose by £6.9 billion in August. This was above the £0.7 billion in July and the £2.6 billion average of the previous six months. Within this, there was an increase in money held by households of £4.0 billion, which is above the average of the past six months. There was also an increase in money held by businesses of £2.6 billion, and an increase in NIOFCs’ money holdings of £0.3 billion.

1. There is a sizable discrepancy between the total net finance raised and its components due to the aggregate being seasonally adjusted separately to the components.

Summary tables

Highs and lows

Next release date: 29 October 2018

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