Money and Credit - May 2021

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 June 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 rebounded to £6.6 billion in May from £3.0 billion in April, but remained below the record £11.4 billion in March. Mortgage approvals for house purchase were 87,500 in May, up very slightly from 86,900 in April, but lower than the recent peak of 103,200 in November 2020.
  • For the first time since August 2020, consumers borrowed more as consumer credit than they paid off in May. Net borrowing was £0.3 billion. The effective rate on new personal loans remained low at 5.61%, compared to 7.03% in January 2020.
  • Households’ net flow in to deposit accounts fell again in May, to £7.0 billion. Deposit interest rates fell slightly to new historically low levels.
  • Large businesses made net repayments of £1.9 billion of loans in May, with small and medium sized businesses also making their first repayment, of £0.4 billion, in over a year. Private non-financial companies raised £0.6 billion of finance from capital markets in May, compared to a monthly average net issuance of £3.3 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):

Net mortgage borrowing bounced back to £6.6 billion in May. This followed variability in the previous couple of months in anticipation of the reduction in stamp duty ending, which has been extended to the end of June. Net borrowing was £3.0 billion in April, following a record £11.4 billion of net borrowing in March (Chart 1). Net borrowing in May was slightly higher than the monthly average for the six months to April 2021 and above the average of £4.2 billion in the year to February 2020. Gross lending was a little higher at £24.2 billion, while gross repayments dropped to £18.9 billion.

Chart 1: Mortgage lending

Seasonally adjusted flows

Approvals for house purchases increased slightly in May to 87,500, from 86,900 in April. They have fallen from a recent peak of 103,200 in November, but remain above pre-February 2020 levels. Approvals for remortgage (which only capture remortgaging with a different lender) rose slightly to 34,800 in May, from 33,400 in April. This remains low compared to the months running up to February 2020.

The ‘effective’ rate – the actual interest rate paid – on newly drawn mortgages rose 2 basis points to 1.90% in May. 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 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). However, for the first time since August 2020, consumers borrowed more than they paid off in May, with net borrowing of £0.3 billion. The annual growth rate remained weak, but rose to -3.2% in May from -5.7% in April.

The increase in net consumer credit reflected an additional £0.4 billion of ‘other’ forms of consumer credit, such as car dealership finance and personal loans. Credit card lending remained weak compared to pre-February 2020 levels, with a net repayment of £0.1 billion. The annual growth rates of both components have risen from series lows in February, but remained weak at -0.4% and -9.9%, respectively.

Chart 2: Consumer credit

Seasonally adjusted

The effective interest rate on interest-charging overdrafts fell by 42 basis points to 19.78% in May, dropping below 20% for the first time since August 2020. Rates on new personal loans to individuals decreased by 4 basis points, to 5.61% in May, compared to an interest rate of 7.03% in January 2020. The cost of credit card borrowing, in contrast, increased by 13 basis points to 17.83% in May. The changes in rates on credit cards and personal loans in May partially offset changes in April.

Households’ deposits (M&C Table J):

Households deposited an additional £7.0 billion with banks and building societies in May. The net flow has fallen in recent months, and compares to an average net flow of £16.5 billion in the six months to April 2021 (Chart 3) and a series peak of £27.6 billion in May 2020. The flow is nevertheless relatively strong - in the year to February 2020, the average inflow was £4.7 billion. There was an outflow of £0.1 billion from National Savings and Investment (NS&I) accounts, which are not captured within household deposits but can act as a substitute for them.

Chart 3: Households’ deposits

Seasonally adjusted net flow

The effective interest rate paid on individuals’ new time deposits with banks decreased by 13 basis points to 0.33%, a new series low. The effective rates on the outstanding stock of time deposits fell marginally to another new series low, at 0.42%, whilst sight deposit rates stood still at 0.10%.

Lending to and deposits from businesses

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

UK non-financial businesses (PNFCs and public corporations) made net repayments of £2.2 billion to banks in May, having repaid £4.8 billion in April. The average cost of new borrowing from banks by all PNFCs rose 44 basis points to 2.26%. This is above the average seen since March 2020 and compares with a series low of 1.05% in May 2020. The rise in May 2021 was driven by a 58 basis points increase in the cost of floating-rate loans – which account for the majority of corporate borrowing – to 2.27%. The cost of fixed rate loans, in contrast, decreased to 2.14%.

The weakness in borrowing mostly reflected large non-financial businesses repaying £1.9 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 July 2020. Although the monthly flow remained very weak, the annual growth rate of borrowing by all large businesses increased slightly from a series low in April, to -11.9% in May (Chart 4).

Small and medium sized non-financial businesses repaid loans, on net, in May (£0.4 billion). This follows average net borrowing of £3.2 billion per month since March 2020. The annual growth rate fell sharply from 25.4% in April to 12.7% in May: particularly strong borrowing in May 2020 is no longer boosting an annual comparison. The growth rate remains historically very high, however. Interest rates on new loans to SMEs increased by 106 basis points to 2.99% in May, the highest since March 2020 (3.01%).

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

Seasonally adjusted

Market Finance (M&C Table F):

Private non-financial companies (PNFCs) raised £0.6 billion in financial markets in May, on net (Chart 5), offsetting the redemptions in April. This follows the largest repayment on record in March, of £6.2 billion, and remains below the monthly average of £3.3 billion net issuance since March 2020.

There was net issuance of bonds and equity at £1.6 billion and £0.8 billion respectively. This was partially offset by net redemption of commercial paper at £1.8 billion. The issuance of bonds follows two straight months of net redemptions in March and April, totalling £4.2 billion.

Chart 5: Net finance raised by PNFCs1

Seasonally adjusted net flow

Footnotes

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

Businesses’ deposits with banks:

In May, UK businesses deposited £17.7 billion with banks in all currencies, on net, after withdrawing £9.6 billion in April. This is the largest net deposit since June 2020 (£19.0 billion). The net inflow in May is above the average inflow for the 12 months to April 2021 (£8.5 billion). The effective rates on new time deposits and stock sight deposits for PNFCs remained broadly unchanged at very low levels in May, at 0.06% and 0.04%, respectively.

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

Sterling money (known as M4ex) increased by £7.2 billion in May, down from £9.6 billion in April. This is the lowest since August 2020 (£0.8 billion), and before that December 2019 (£6.3 billion). Households’ holdings of money continued rising with net flows of £7.0 billion, though this has been decreasing month on month since December 2020’s high of £20.6 billion. PNFCs’ holdings (on a seasonally adjusted basis) increased by £1.2 billion, down from £2.2 billion in April.

Sterling net lending to private sector companies and households, or M4Lex, rose in May, by £7.1 billion. This was up from £0.4 billion net repayment in April, and the highest since November 2020 (£18.7 billion).

Queries

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

Next release date: 29 July 2021

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