Money and Credit - July 2018

These monthly statistics on borrowing and deposits by households and businesses are used by the Bank’s policy committees to understand economic trends and developments in the banking system.
Published on 30 August 2018

Key points

  • The annual growth rate of consumer credit slowed in July, to 8.5%, but remains elevated relative to 2009-12.
  • Households borrowed an additional £3.2 billion secured against their homes in July. Net lending has been relatively stable over the past year but this was the lowest amount of monthly secured lending since April 2017.
  • Net lending to businesses increased to £2.7 billion in July, but this was primarily driven by the public administration and defence industry.

References in the text point to the summary tables. 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, fell to £0.8 billion in July, down from £1.5 billion in June (Chart 1). This is notably below the average of the past three years, of £1.5 billion. This series has been volatile in the recent past, with similar weakness in the March data. This month’s fall reflected a weakening in both credit card lending and other loans and advances (which includes personal loans, overdrafts and car finance), to £0.2 billion and £0.6 billion respectively.

The annual growth rate of consumer credit lending shows the trend in net lending over the past twelve months. In July, the annual growth rate of consumer credit slowed a little to 8.5%. Within this, the annual growth rate of credit card lending was 8.9%, whilst the growth rate of other loans and advances was 8.2% - the lowest since March 2015. Although the annual growth rate of consumer credit remains high, particularly compared to 2009-12, the gradual slowing continues the trend since late 2016.

Chart 1: Consumer credit flows

Seasonally adjusted

Chart 1: Consumer credit flows

Mortgage lending (Tables D and E)

Households borrowed an extra £3.2 billion secured against their homes in July. Net lending has been relatively stable over the past year or so, but this was the lowest monthly secured net lending since April 2017. Despite this, the annual growth rate for mortgage lending remained unchanged at 3.2% in July, and has now been around 3% since late 2016. Although this is above the growth rate between 2009 and 2013, it remains modest compared to the pre-crisis period.

The number of mortgages approved for house purchase fell a little in July, to 65,000, close to their average over the past six months. This data gives us an indication of how much new mortgage lending we might expect to see in coming months. The number of approvals for remortgaging fell 5.5% in July to 45,000. Approvals can be volatile and for remortgaging are at their lowest since May 2017, however they remain above levels seen in recent years.

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 £2.0 billion in July, slightly below the average over the past year (Chart 2). Within this, businesses’ net issuance of bonds remained subdued at £0.5 billion, whilst their net issuance of commercial paper and equity both increased by £0.2 billion. This is the first time since January 2017 that all the components of net finance raised have been positive.

Chart 2: Net finance raised by PNFCs

Seasonally adjusted

Chart 2: Net finance raised by PNFCs

Net bank lending to non-financial businesses (which includes lending to businesses in the public sector) increased £2.7 billion in July. This was made up of £3.1 billion of net lending to large businesses, and a £0.4 billion reduction of net lending to small and medium enterprises (SMEs). The strength in lending to large businesses this month was driven by an increase in lending to the public administration and defence industry.

Despite the relatively strong flow in July, the annual growth rate of lending to businesses fell further on the month. The twelve-month growth rate of lending to large businesses fell 1.7 percentage points to -0.1%. This large fall is mostly due to a mechanical effect: a strong flow in July 2017 dropped out of the 12 months in scope whilst a large negative flow in August 2017 remained. When the weak August flow drops out, the annual growth rate is likely to increase somewhat. The twelve-month growth rate of lending to SMEs was -0.2% in July; this growth rate has been at or below zero for the past four months.

Broad money (Table J)

Following a fall in June, the total amount of money held by UK households, businesses and non-intermediary other financial corporations (NIOFCs) (Broad money or M4ex) rose by £0.9 billion in July. Although this flow is stronger than June, it is considerably below the average of the previous six months of £4.3 billion. Within this, there was an increase in money held by households of £2.6 billion, which is broadly in line with the average of the past six months, and an increase in money held by businesses of £2.7 billion. These increases were offset by a reduction in NIOFCs’ money holdings of £4.4 billion.
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