Money and Credit - November 2020

Overview

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 mortgage borrowing strengthened to £5.7 billion in November. Mortgage approvals for house purchase increased further to 105,000, the highest since August 2007. Effective interest rates on new mortgage borrowing ticked up to 1.83%.
• Consumer credit remained weak in November, with households making net repayments of £1.5 billion. Effective rates on new personal loans increased by 31 basis points to 5.46%.
• Private non-financial companies borrowed £2.3 billion from capital markets in November. Bank borrowing by small and medium-sized businesses remained strong at £1.8 billion, whilst net borrowing by large businesses was £0.2 billion.
• Household deposits increased by £17.6 billion in November, but there were significant withdrawals from National Savings and Investment accounts. Business deposit flows remained strong at £5.3 billion. Deposit interest rates remained 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, Capital Issuance and Bankstats tables.

Lending to individuals

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

The mortgage market strengthened in November. Households borrowed an additional £5.7 billion secured on their homes, following net borrowing of £4.5 billion in October. November borrowing was the highest since March 2016, and significantly higher than the average of £3.9 billion seen in the six months to February 2020. Recent strength in net mortgage borrowing has, however, only partially offset weakness earlier in the year: total borrowing in the year to November (£37.6 billion) was below the equivalent in 2019 (£44.0 billion).

The continued strength in mortgage borrowing follows a large number of approvals for house purchase over recent months. In November, the number of these approvals – an indicator for future lending - continued increasing, to 105,000 from 98,300 in October (Chart 1). This was the highest number of approvals since August 2007 and recent strength in approvals has almost fully offset the significant weakness earlier in the year. There were 715,300 house purchase approvals up to November 2020, close to the number during the same period in 2019 (722,000). Approvals for remortgage (which only capture remortgaging with a different lender) rose slightly in November to 35,100, but remain around 33% lower than in February 2020.

Chart 1: Mortgage approvals

Seasonally adjusted

The ‘effective’ interest rates – the actual interest rates paid – on newly drawn mortgages rose 5 basis points to 1.83% in November. That is close to the rate at the start of the year (1.85% in January), and compares with a trough of 1.72% in August. The rate on the outstanding stock of mortgages was little changed at 2.11% in November.

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

Household’s consumer credit weakened further in November with net repayments of £1.5 billion; that followed a net repayment of £0.7 billion in October (Chart 2). The weakening on the month reflected a fall in new borrowing. Since the beginning of March, households have repaid £17.3 billion of consumer credit. That has caused the annual growth rate to fall to -6.7% in November, a new series low since it began in 1994.

Within consumer credit, the weakness was broad based with net repayments on both credit cards (£0.9 billion) and other forms of consumer credit (£0.7 billion). As a result, the annual growth rates of both components fell further, to -14.5% and -3.0%, respectively. For credit cards, this represents a new series low.

The effective rate on interest-charging overdrafts was 20.62% in November, above the rate of 10.32% in March 2020 before new rules ending overdraft fees came into effect. Following discussions with reporters on how to account for the ending of fees and COVID support measures, these overdraft rates are now estimated to have been lower between April and September than previously thought, and similar since October. Rates on new personal loans to individuals increased in November by 31 basis points, to 5.46%, but remain low compared to an interest rate of around 7% in early 2020. The cost of credit card borrowing fell by 47 basis points to 17.49% in November; a new series low.

Chart 2: Consumer credit

Seasonally adjusted net flow

Households’ deposits (M&C Table J):

Households’ deposits increased by £17.6 billion in November, up from £12.7 billion in October (Chart 3). The increase in November was similar to the average flow between March and June of £17.5 billion a month. The strengthening in November might not reflect a greater household desire to hold cash-like, liquid, assets, however. National Savings and Investment (NS&I) accounts, which are not captured within household deposits but can act as a substitute for them, were historically weak in November, with £6.2 billion of withdrawals. The combined flow into both deposits and NS&I accounts was stable between September and November at around £12 billion, compared with an average of £21.7 billion between March and June.

The effective interest rate paid on individuals’ new time deposits with banks fell by 3 basis points in November, to 0.50%, and remains much lower than in February (1.04%). The effective rates on the outstanding stock of both sight and time deposits were broadly flat, at 0.12% and 0.53%, respectively. The rate on the stock of sight deposits remains the lowest since the series began, and 34 basis points lower than in February.

Lending to and deposits from businesses

Market Finance (M&C Table F):

Private non-financial companies (PNFCs) raised £2.3 billion from financial markets in November, down from £7.8 billion in October (Chart 4). This is broadly in line with the monthly average seen in the six months to February 2020 (£1.6 billion). The lower net issuance in November in part reflected a fall in gross capital issuance by PNFCs, which fell by £1.1 billion to £10.4 billion in November. The net issuance reflected continued strength in equities, at £4.1 billion in November, up from £3.0 billion in October. Net issuance of commercial paper was broadly unchanged at £0.3 billion, whilst there were net repayments of bonds at £2.1 billion reflecting lower gross issuance and higher repayments.

Chart 4: Net financed raised by PNFCs¹

Seasonally adjusted net flow

Footnotes

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

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

Overall, PNFCs borrowed £2.1 billion of bank loans in November, following net repayments of £6.8 billion in October (Chart 4). The average cost of new borrowing from banks by all PNFCs fell slightly to 1.63%, 6 basis points lower than October. The rate compares with 2.56% in February 2020.

Within overall corporate borrowing, small and medium sized non-financial businesses (PNFCs and public corporations) continued borrowing more from banks, on net. In November, they drew down an extra £1.8 billion in loans. SMEs have borrowed a significant amount since May, and as a result the annual growth rate has risen sharply, reaching 25.2% in November, the strongest on record (Chart 5). Interest rates on new loans to SMEs increased by 21 basis points to 2.04% in November, but remain well below the rate of 3.44% in February. Rates have risen gradually over recent months from a trough of 0.98% in May.

Net borrowing by large non-financial businesses was broadly flat in November, at £0.2 billion. Large businesses have been making large net repayments seen since May, including £6.6 billion in October. This trend has pushed the annual growth rate of borrowing by all large businesses negative, to -2.7% in November; the lowest since December 2014.

Chart 5: Annual growth of lending to SMEs and large businesses

Seasonally adjusted

Businesses deposits with banks:

UK businesses’ deposits rose by £5.3 billion in November, down from £13.0 billion in October. This was significantly higher than the monthly average of £0.4 billion of withdrawals in the six months to February 2020, but remained well below the average £28.8 billion between March and June. The effective rates on new time deposits and stock sight deposits for PNFCs were broadly unchanged in November, at 0.07% and 0.06%, respectively.

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

Overall, private sector companies and households significantly increased their holdings of money in November. Sterling money (known as M4ex) increased by £31.9 billion in November; broadly in line with October which saw holdings increase by £33.5 billion. This is similar to strong deposit flows seen between March and July, which saw money holdings increase by £41.1 billion on average each month.

Sterling net lending to private sector companies and households, or M4Lex, was £18.2 billion in November, up from £7.3 billion net lending in October, and the highest since March.

Total net capital issuance by PNFCs and financial companies was -£4.2 billion in November, down from £7.7 billion in October. This reflected a fall in gross issuance to £35.8 billion in November, which was £5.7 billion lower than in October and £6.9 billion lower than the previous six month average. Most of the fall in gross issuance was from the financial sector, which was £4.6 billion lower. This was primarily due to a £2.9 billion fall in bond issuance from £17.5 billion in October to £14.6 billion in November, driven entirely by a fall in issuance by MFIs. For further details, please see the Capital Issuance statistical release.

Queries

If you have any comments or queries about this release please email dsd_ms@bankofengland.co.uk.

Next release date: 1 February 2021