Money and Credit - December 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 UK banking system.

Key points:

• Net borrowing of mortgage debt by individuals amounted to £3.6 billion in December. Mortgage approvals for house purchase rose to 71,000 in December, above the 12-month average up to February 2020 of 66,700.
• Consumers borrowed an additional £0.8 billion in consumer credit, on net. The effective rate on new personal loans fell by 16 basis points to 6.27% in December
• Sterling money (known as M4ex) was unchanged in December, down from a £14.1 billion increase in November. Households’ holdings of money weakened with net flows of £2.7 billion compared with £5.1 billion in November.
• The effective interest rate paid on individuals’ new time deposits with banks and building societies fell to 0.36%.
• Large businesses borrowing from banks fell to £0.3 billion in December, whilst small and medium sized businesses repaid £0.6 billion. Private non-financial companies (PNFCs) redeemed £3.2 billion in net finance from capital markets.

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):

Net borrowing of mortgage debt by individuals decreased slightly to £3.6 billion in December, from £3.8 billion in November. This is below the pre-pandemic average of £4.2 billion in the 12 months up to February 2020. Gross lending fell to £21.7 billion in December, from £22.4 billion in November. Gross repayments fell to £18.1 billion from £19.4 billion in November (Chart 1).

Approvals for house purchases, an indicator of future borrowing, increased slightly to 71,000 in December, above the 12-month average up to February 2020 of 66,700. Approvals for remortgaging (which only capture remortgaging with a different lender) rose slightly to 44,900 in December. This remains low compared to the 12-month average up to February 2020 of 49,500, but is the highest since February 2020 (52,500).

The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages rose 8 basis point to 1.58% in December. The rate on the outstanding stock of mortgages ticked down 2 basis point to a new series low of 2.00%.

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

Individuals borrowed £0.8 billion in consumer credit in December, on net (Chart 2). This was split between £0.4 billion of additional borrowing on credit cards, and £0.4 billion in borrowing in other forms of consumer credit (such as car dealership finance and personal loans).

The annual growth rate for all consumer credit increased to 1.4% in December from 0.8% in November. The annual growth rates of credit cards and other forms of consumer credit were 2.0% and 1.1% respectively.

The effective interest rate on interest-charging overdrafts in December fell 41 basis points to 20.53% after reaching a series high in November. Rates on new personal loans to individuals fell by 16 basis points, to 6.27% in December, 76 basis points below the January 2020 level. The cost of credit card borrowing was 17.86% in December, 65 basis points below the January 2020 level.

Households’ deposits (M&C Table J):

Households deposited an additional £2.7 billion with banks and building societies in December. In addition, households deposited £0.5 billion into National Savings and Investment (NS&I) accounts in December, which are not captured within household deposits with banks and building societies but can act as a substitute for them. The combined net flow into both deposits and NS&I accounts in December (£3.2 billion) compares to an average monthly net flow of £10.6 billion in the twelve months to November 2021 (Chart 3). The combined December net flow was lower than pre-pandemic flows; in the year to February 2020, the average net flow was £5.5 billion.

The effective interest rate paid on individuals’ new time deposits with banks and building societies and outstanding stock of time deposits were broadly unchanged at 0.36% and 0.33% respectively. The effective rates on stock sight deposits remained at a series low of 0.09%.

Lending to and deposits from businesses

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

UK non-financial businesses (PNFCs and public corporations) repaid £0.3 billion of bank loans in December, on net, compared to net borrowing of £2.3 billion in November (Chart 4). Net borrowing by large non-financial businesses was £0.3 billion in December, compared to £3.1 billion in November. Small and Medium sized non-financial businesses (SMEs) repaid £0.6 billion, on net, falling from a £0.8 billion net repayment in November.

The annual growth rate of borrowing by all large businesses increased to 1.9% in December from 1.5% in November.

The average cost of new borrowing from banks by all PNFCs fell by 2 basis points to 2.03% in December. The rate in December was above the average seen since March 2020 (1.93%).

The net loan repayment of £0.6 billion by SMEs in December was the ninth month in a row of net repayments. The annual growth rate fell to -3.8%, the lowest since January 2013 (-4.0%).

Interest rates on new loans to SMEs fell 14 basis points to 2.50% in December, remaining well below January 2020 rates (3.37%).

Market Finance (M&C Table F):

Private non-financial companies redeemed a net £3.2 billion of market finance in December (Chart 5), an increase from the £1.1 billion redemption in November. There was a net redemption of £1.0 billion in both bonds and equity, in addition to a £1.3 billion redemption of commercial paper.

Businesses’ deposits:

In December, UK non-financial businesses deposited £1.8 billion, on net, with banks and building societies in all currencies, compared to a net deposit of £12.9 billion in November.

The effective rates on new time deposits and stock sight deposits were broadly unchanged at 0.11% and 0.05% respectively.

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

Sterling money (known as M4ex) was unchanged in December, compared to a £14.1 billion increase in November. Households’ holdings of money weakened with net flows of £2.7 billion compared with £5.1 billion in November, falling below the average of £4.7 billion in the twelve months to February 2020. PNFCs’ holdings of money weakened with net flows of -£0.1 billion, compared to an increase of £4.6 billion in November.

Sterling net lending to private sector companies and households, or M4Lex, fell to £1.8 billion in lending in December from £2.7 billion of lending in November.