Money and Credit - August 2020

Our monthly Money and Credit statistical release is made up of three parts: broad money and credit, lending to individual and lending to businesses.
Published on 29 September 2020


These monthly statistics on the amount of, and interest rates 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.

Key points:

  • Net consumer credit borrowing remained positive in August at £0.3 billion, following a £1.1 billion increase in July. The interest rate on interest-charging overdrafts increased 4.2 percentage points to 19.00% in August, while the rate on new consumer credit borrowing increased 7 basis points to 4.71%.
  • Net mortgage borrowing was £3.1 billion in August, similar to July. Mortgage approvals for house purchase increased sharply to 84,700, the highest since October 2007. Effective mortgage interest rates were broadly unchanged.
  • Private corporates borrowed £2.7 billion from capital markets in August, and borrowed £0.4 billion from banks. Small and medium sized non-financial businesses (SMEs) borrowed £2.2 billion, on net, from banks, while large businesses borrowed £2.1 billion, after three months of net repayments
  • Overall, the flow of money (M4ex) was -£0.9 billion in August. That followed an increase of £25.6 billion in July. Deposit interest rates are at historically low levels.

References in the text point to the summary tables below. For further statistics, please see our visual summaries, Effective Rates (ER) statistical release, and Bankstats tables.

Lending to individuals

Consumer credit (M&C Tables B and C):

Net consumer credit borrowing remained positive in August at £0.3 billion. This was a little weaker than borrowing of £1.1 billion in July, which was in line with the average net flow in the 18 months to February 2020. These increases followed net repayments of £3.9 billion per month, on average, between March and June (Chart 1). The annual growth rate fell slightly to -3.9%, down from -3.7% in July: this was a new series low since it began in 1994.

Weaker net lending can also be seen in the components of consumer credit. Net borrowing on credit cards was £0.2 billion in August (down from £0.6 billion), while net borrowing of other forms of consumer credit was £0.1 billion, down from £0.5 billion in July. The annual growth rates both remained negative, at -10.4% and -0.9% respectively.

The lower consumer credit net borrowing reflected gross borrowing increasing by less than gross repayments. Both remained around 16% lower than their pre-covid levels. Gross borrowing was £21.3 billion, up from £20.9 billion in July and compared to an average of £25.5 billion in the six months to February 2020. Repayments increased to £20.6 billion from £19.6 billion in July.

The ‘effective’ rate – the actual interest rate paid – on interest-charging overdrafts rose by 4.2 percentage points to 19.00% in August. This is the highest since the series began in 2016, and compares to a rate of 10.32% in March 2020 before new rules on overdraft pricing came into effect. Rates on new personal loans to individuals increased a little in August, by 7 basis points to 4.71%. This compares to an interest rate of around 7% in early 2020. The cost of credit card borrowing was broadly unchanged at 17.95% in August.

Chart 1: Consumer credit

Seasonally adjusted

Mortgage lending (M&C Tables D and E):

The mortgage market continued to show more signs of recovery in August. On net, households borrowed an additional £3.1 billion secured on their homes, following borrowing of £2.9 billion in July. Mortgage borrowing troughed at £0.5 billion in April, and is still a little below the average of £4.2 billion in the six months to February 2020. The increase on the month reflected slightly higher gross borrowing of £18.8 billion, although it is still below the pre-Covid February level of £23.7 billion.

The number of mortgage approvals for house purchase continued increasing sharply in August, to 84,700 from 66,300 in July (Chart 2). This was the highest number of approvals since October 2007 but it only partially offsets weakness seen between March and June. In total, there have been 418,000 approvals in 2020, compared with 524,000 in the same period in 2019. Approvals for remortgage (which capture remortgaging with a different lender) are little changed compared to July, at 33,400. They are 36% lower than in February 2020.

Chart 2: Mortgage approvals

Seasonally adjusted

The effective rates on new and outstanding mortgages were little changed in August. New mortgage rates were 1.72%, a decrease of 1 basis point on the month, while the interest rate on the stock of mortgage loans fell 1 basis point to 2.14% in August.

Households’ deposits (M&C Table J):

Households’ deposits increased by £5.2 billion in August. That was slightly lower than the increase of £6.5 billion in July, and below the average of £17.2 billion between March and June. The August increase was broadly in line with the average in the six months to February 2020. The flow of deposits in August can be accounted for by deposits into instant access accounts.

The interest rates paid on individuals’ deposits fell further in August. The effective interest rate on new time deposits fell 6 basis points to a new series low of 0.50%, 54 basis points lower than in February. The effective rate on the outstanding stock of time deposits fell 3 basis points to 0.57%. The rate on the stock of sight deposits fell 7 basis points to 0.14%, the lowest since the series began in 2016, and 32 basis points lower than in February.

Lending to and deposits from businesses

Market Finance (M&C Table F):

In August, firms raised £2.7 billion from financial markets, on net, little changed from the £3.0 billion raised in July. This was slightly above the pre-covid average in the six months to February 2020 of £1.6 billion (Chart 3). But it was somewhat weaker than the average increase between March and June of £7.7 billion. The increase in August was driven by net issuance of bonds, which increased £2.6 billion and equity, which increased £0.9 billion. There was a net redemption of commercial paper of £0.8 billion.

Chart 3: Net financed raised by PNFCs 1

Seasonally adjusted

Businesses borrowing from banks (M&C Tables F-I):

Overall, corporates borrowed £0.4 billion of loans in August. Small and medium sized companies (SMEs) continued borrowing in August, and large companies started borrowing again after three months of repayments. The average cost of borrowing from banks by PNFCs of all sizes decreased in August. The effective interest rate paid on new borrowing by PNFCs fell to 1.63%, 11 basis points lower than in July and 93 basis points lower than in February 2020.

Small and medium sized businesses continued borrowing from banks. In August they drew down an extra £2.2 billion in loans, on net. The strong flows in recent months meant that the annual growth rate rose further, to 21.8%, the strongest on record (Chart 4). Interest rates on new loans to SMEs remain low, although did increase on the month. The effective rate on their new borrowing was 9 basis points higher at 1.74%, although this remained below the rate of 3.44% in February.

Large non-financial businesses also borrowed from banks in August. They drew down £2.1 billion, following average net repayments of £12.5 billion a month between May and July. The annual growth rate of borrowing by all large businesses fell to 3.3%, a continuation of the fall seen in July.

Chart 4: Annual growth of lending to SMEs and large businesses

Seasonally adjusted

Businesses deposits with banks (M&C Tables F-I):

UK businesses’ deposits in all currencies rose by £12.7 billion in August, up from £7.5 billion in July but below the average £28.8 billion between March and June. Deposits remained significantly higher than the monthly average of -£0.4 billion withdrawals in the six months to February 2020. The effective rates on new time deposits for PNFCs fell 8 basis points to 0.10% in August, while the rate on stock sight deposits was unchanged at 0.09%.

Aggregate money (M4ex) and lending (M4Lex) (M&C Table J)

Overall, private sector companies and households reduced their holdings of money in August, following 5 months of unusually strong deposit flows. Sterling money (known as M4ex) fell by £0.9 billion in August, down from an increase of £25.6 billion in July (Chart 5).

The private sector made a net repayment of loans in August. Sterling net lending to private sector companies and households, or M4Lex, was -£3.9 billion, following a net repayment of £0.5 billion in July.

Chart 5: Broad money by sector

Seasonally adjusted


1. There is a discrepancy between the total of net finance raised and its components due to the seasonal adjustment methodology.


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Next release date: 29 October 2020

More information

Some errors were found in the ‘Lending to Individuals’ section of the 'Highs and Lows' tables published at 9.30am on 29 September 2020. These have been corrected and we apologies for any inconvenience that this has caused.