Money and Credit - April 2021

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 was £3.3 billion in April, down from a record £11.5 billion in March. Mortgage approvals for house purchase were 86,900 in April, up a touch from March (83,400), but lower than the recent peak of 103,400 in November 2020.
• Individuals continued making net repayments of consumer credit in April (£0.4 billion). The effective rate on new personal loans remained low at 5.65%, compared to 7.03% in January 2020.
• Households’ deposit flows fell in April, to £10.7 billion. Deposit interest rates remained at historically low levels.
• Large businesses made net repayments of £4.8 billion in April, whilst net bank borrowing by small and medium sized businesses was £0.3 billion. Private non-financial companies repaid £0.6 billion of finance to capital markets in April, compared to a monthly average net issuance of £3.6 billion since March 2020.

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 statistical release, and Bankstats tables.

Lending to individuals

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

Mortgage borrowing fell back in April. Individuals borrowed an additional £3.3 billion secured on their homes, following a record £11.5 billion in March (Chart 1). This was also lower than the £5.7 billion monthly average borrowed in the six months to February 2021. Despite weaker net lending, both gross lending and repayments remain above levels seen since the start of 2020. The recent variability is likely to reflect the reduction in the stamp duty tax, which was initially expected to end in March, but has now been extended to the end of June.

Approvals for house purchase ticked up in April, to 86,900, from 83,400 in March. They have fallen from a recent peak of 103,400 in November, but have remained relatively strong. In February 2020, there were 73,400 approvals for house purchase. Approvals for remortgage (which only capture remortgaging with a different lender) remained broadly unchanged at 33,100.

The ‘effective’ rate – the actual interest rate paid – on newly drawn mortgages fell 7 basis points to 1.88% in April. That is marginally above the rate in January 2020 (1.85%), and compares to a series low of 1.72% in August 2020. The rate on the outstanding stock of mortgages remained broadly unchanged at a series low of 2.07%.

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

Individuals have made significant net repayments of consumer credit since March 2020 (Chart 2). The further net repayment of £0.4 billion in April this year was, however, less than seen on average each month over the previous year (£1.7 billion). As a result, the annual growth rate – while remaining weak at -5.7% in April – rose from -8.8% in March.

Within consumer credit, the repayment in April was concentrated in credit cards (£0.4 billion). There was no additional borrowing in other forms of consumer credit. The annual growth rates of both components have risen from series lows in February, but remained weak at -12.9% and -2.7%, respectively.

The effective interest rate on interest-charging overdrafts fell by 11 basis points to 20.20% in April, but remained within the 20-21% range seen since September 2020. The cost of credit card borrowing fell by 31 basis points to 17.70% in April. Rates on new personal loans to individuals, in contrast, increased by 62 basis points, to 5.65% in April, compared to an interest rate of 7.03% in January 2020.

Households’ deposits (M&C Table J):

Households deposited an additional £10.7 billion with banks and building societies in April. This was the smallest net flow since September 2020 (£7.4 billion) and compares to a net flow of £16.1 billion in March 2021 (Chart 3). The flow remained strong relative to recent years, however: in the 6 months to February 2020, the average monthly net flow was £4.6 billion. There were no additional flows into or out of National Savings and Investment (NS&I) accounts, which are not captured within household deposits but can act as a substitute for them. This follows six months of net outflows. The combined flow into both deposits and NS&I accounts in April (£10.7 billion) was lower than both March (£15.7 billion) and the monthly average seen since March 2020.

The effective interest rate paid on individuals’ new time deposits with banks decreased by 2 basis points to 0.47%, and remained close to series lows. The effective rates on the outstanding stock of both sight and time deposits fell marginally to new series lows, at 0.10% and 0.44%, respectively.

Lending to and deposits from businesses

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

UK businesses (PNFCs and public corporations) made significant net repayments, of £4.6 billion, to banks in April. That is higher than the £0.4 billion repaid in March. The average cost of new borrowing from banks by all PNFCs fell by 62 basis points, to 1.82%. This is broadly in line with the average seen since March 2020 and compares with a series low of 1.05% in May 2020. The fall in April was driven by a 77 basis points decrease in the cost of floating-rate loans – which account for the majority of corporate borrowing – to 1.69%. The cost of fixed rate loans, in contrast, rose to 2.61%.

The weakness in borrowing reflected large non-financial businesses repaying £4.8 billion of loans in April, on net. This continues the trend of net repayments seen for much of the past year, and is broadly in line with the monthly average repaid since May 2020. As a result, the annual growth rate of borrowing by all large businesses dropped further in April, to -14.9% from -10.2% in March (Chart 4).

Borrowing by small and medium sized non-financial businesses in April was similar to recent months, as they drew down an extra £0.3 billion in loans. The annual growth rate remained close to its series high at 25.5%. Interest rates on new loans to SMEs fell to 1.94% in April. This remained well below the rate of 3.37% in January 2020.

Market Finance (M&C Table F):

Private non-financial companies (PNFCs) repaid £0.6 billion of financial market issuance in April, on net (Chart 5). This follows the largest repayment on record in March, of £6.2 billion. It remains well below the monthly average of £3.6 billion net issuance since March 2020, however.

There were net redemptions of bonds, at £1.8 billion. This was partially offset by net issuance of equity and commercial paper, at £0.7 billion and £0.5 billion, respectively. The small amount of net issuance in commercial paper in April follows record lows seen in March (-£4.3 billion).