Money and Credit - June 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 July 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

  • UK households and businesses continued strongly increasing their sterling money holdings in June. The £16.0 billion increase was, however, less than the £53 billion monthly average increase seen since March. Interest rates on deposits fell further in June - new time deposit rates fell 14 basis points to 0.73%.
  • Household’s net borrowing was £1.8 billion in June following large repayments in previous months. The increase can all be accounted for by mortgage borrowing. Mortgage interest rates were broadly unchanged.
  • Approvals for mortgages for house purchase increased to 40,000 in June, up from the record low of 9,300 in May, but still below February’s pre-Covid level of 73,700.
  • Households repaid £86 million of consumer credit, on net, in June, following average monthly repayments of around £5 billion since March. The interest rate on new consumer credit borrowing fell 68 basis points to 4.42% in June, while credit card interest rates fell 42 basis points to 17.94%.
  • Corporates raised an extra £10.7 billion of finance in June, almost all from financial markets. SMEs continued borrowing from banks, drawing £10.2 billion of extra loans, while large businesses repaid loans.

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.

Headline money and lending (M&C Table J)

Private sector companies and households continued increasing their deposit balances with banks at a historically fast pace in June, albeit more slowly than the previous few months. Sterling money (known as M4ex) rose by £16.0 billion in June, following an average monthly increase of £53 billion between March and May. Since March an additional £175 billion was deposited with banks, more than the cumulative total in most years. In the year to February 2020, a total of £98.3 billion was deposited, an average of around £8 billion per month.

Net household borrowing recovered a little in June, and PNFCs continued to increase their overall debt levels. Households borrowed an extra £1.8 billion of loans in June, following large net repayments in April and May, of £7.3 billion and £3.3 billion respectively. Corporates raised a total of £10.7 billion of debt in June, predominantly from financial markets. While corporates raised slightly less debt in June than in April and May, it remained strong relative to the pre-Covid period.

Chart 1: Broad money by sector

Seasonally adjusted

Lending to individuals

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

Household’s consumer credit borrowing recovered a little in June, following three particularly weak months (Chart 2). But it remains significantly weaker than pre-Covid. On net, people repaid £86 million of consumer credit in June following repayments totalling £15.6 billion over the previous three months. The small net repayment contrasts with an average of £1.1 billion of additional borrowing per month in the 18 months to February 2020. The weakness in consumer credit net flows in recent months meant that the annual growth rate was -3.6%, the weakest since the series began in 1994.

The smaller net repayment compared to May reflected an increase in gross borrowing. Gross borrowing was £17.7 billion, up from £13.6 billion in May, but this was still below the average £25.5 billion a month in the six months to February 2020. Repayments on consumer borrowing were broadly stable in June, at £18.1 billion, below their pre-Covid February level of £24.6 billion.

Within total consumer credit, on net there was a further small repayment of credit card debt (£248 million) and a small amount of additional other borrowing (£162 million). The annual growth rate for both credit cards and other borrowing fell back a little further, to -11.6% and 0.2% respectively.

The ‘effective’ rate – the actual interest rate paid – on new personal loans to individuals fell further in June. It fell 68 basis points to 4.42%, a new series low; this compares to an interest rate of around 7% in early 2020. The cost of credit card borrowing fell from 18.36% in May to 17.94% in June, also the lowest rate since the series began in 2016. Rates on overdraft borrowing remained around the series’ low in June, with rates on interest-charging overdrafts falling 11 basis points to 8.23%.

Chart 2: Consumer credit

Seasonally adjusted

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

The mortgage market showed some signs of recovery in June, but remained relatively weak in comparison to pre-Covid. On net, households borrowed an additional £1.9 billion secured on their homes. This was higher than the £1.3 billion in May but weak compared to an average of £4.1 billion in the six months to February 2020. The increase on the month reflected both more new borrowing by households, and lower repayments. Gross new borrowing was £15.8 billion in June, below the pre-Covid February level of £23.4 billion.

The number of mortgages approved also increased in June. The number of mortgage approvals for house purchase increased strongly, to 40,000, up from 9,300 in May. Nevertheless, approvals were 46% below the February level of 73,700 (Chart 3). Approvals for remortgage (which capture remortgaging with a different lender) have also increased, to 36,900; but they remain 30% lower than in February.

Chart 3: Mortgage approvals

Seasonally adjusted

The effective rates on new and outstanding mortgages were little changed in June. New mortgage rates were 1.77%, an increase of 3 basis points on the month, while the interest rate on the stock of mortgage loans was 2.16%, unchanged from May and 0.2 percentage points lower than in February.

Households’ deposits (M&C Table J):

Households’ deposits increased by £11.6 billion in June, following strong increases in March (£14.3 billion), April (£17.0 billion), and May (£26.0 billion). In the six months to February 2020, household deposits rose by an average of £5.1 billion per month. The increase in June was primarily driven by deposits in instant access accounts. £9.5 billion of the increase was in interest-earning accounts; non-interest earning deposits rose by £2.5 billion.

The interest rate paid on individuals’ deposits fell in June. The effective interest rate on new time deposits fell 14 basis points to 0.73%, the lowest since the series began in 2016 and 31 basis points lower than in February. The effective rate on outstanding stock of time deposits fell 9 basis points to 0.64%. For sight deposits the rate on the stock fell 3 basis points to 0.26%, the lowest since the series began in 2016, and 20 basis points lower than in February.

Lending to and deposits from businesses

UK private sector businesses borrowed a total of £10.7 billion from banks and financial markets in June, following strong borrowing in March (£31.9 billion), April (£15.5 billion), and May (£11.4 billion) (Chart 4). The strength in June was driven by capital market issuance. Borrowing from banks by SMEs remained strong in June, but repayments of loans by larger companies meant total PNFC borrowing from banks was close to zero.

Chart 4: Net financed raised by PNFCs1

Seasonally adjusted

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

Market Finance (M&C Table F):

Businesses can raise funds from financial markets via instruments such as bonds and commercial paper, or with equity. In June, firms raised £10.6 billion from financial markets, on net. This was up from £3.3 billion in May, and above the average of the six months to February 2020 of £1.6 billion. The increase in June was driven by net issuance of bonds, which increased £7.0 billion and equity, which increased £3.8 billion.

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

Overall, PNFCs borrowed an additional £0.4 billion of loans in June. Strong borrowing by small and medium sized businesses (SMEs) was offset by repayment by large businesses. The average cost of borrowing from banks by PNFCs of all sizes increased in June, following record low rates in May. The effective interest rate paid on new borrowing by PNFCs increased to 1.34%, 29 basis points higher than in May. Notwithstanding the increase in June, rates were 1.2 percentage points lower than in February 2020.

Small and medium sized businesses continued borrowing a significant amount from banks. In June, they drew down an extra £10.2 billion in loans, on net, as gross borrowing remained strong. This was weaker than in May (£18.0 billion), but very strong compared to the past. Before May, the largest amount of net borrowing by SMEs was £0.6 billion, in September 2016. The strong flow in June meant that the annual growth rate rose further, to 17.4%, the strongest on record (Chart 5). This strength is likely to reflect businesses drawing down loans arranged through government-supported schemes such as the Bounce Back Loan Scheme.

Interest rates on new loans to SMEs remain very low, although did increase a little on the month. The effective rate on their new borrowing increased 20 basis points to 1.18%, compared with a rate of 3.44% in February. As SMEs have drawn loans from the Bounce Bank Loan Scheme, which are offered at fixed rates, the share of SME borrowing that is at a fixed rate has increased to 59% in 2020 Q2 from 19% in Q1.

Large non-financial businesses, in contrast, repaid a significant amount of loans in June. The net repayment, of £16.7 billion, was the largest since the series began in 2011 and followed a net repayment of £13.0 billion in May. As was the case in May, around half of the net repayment in June was from the public administration and defence industry. Abstracting from this industry, overall repayments were still large, broadly offsetting borrowing by SMEs. There were large repayments from the real estate and manufacturing industries in particular. The annual growth rate of borrowing by all large businesses fell to 4.8%.

Chart 5: 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 £18.9 billion in June. This large rise was below the increases in March (£34.2 billion), April (£28.5 billion) and May (£33.6 billion), but 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 10 basis points to 0.17% in June, while the rate on stock sight deposits also fell 10 basis points to 0.13%.


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Next release date: 1 September 2020