Money and Credit - September 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:

• Individuals borrowed £9.5 billion of mortgage debt on net in September, the highest since June 2021. Mortgage approvals for house purchase fell further to 72,600 in September from 74,200 in August, but remains above pre-February 2020 levels.
• Consumers borrowed an additional £0.2 billion in consumer credit, on net. The effective rate on new personal loans increased to 6.02% in September, and is the highest since March 2020 but remains below the January 2020 level.
• Households’ net flow in to deposit accounts ticked down in September, to £9.4 billion. Deposit interest rates in September were broadly unchanged and remained at historically low levels.
• Large businesses borrowed £1.0 billion in loans from banks in September, whilst small and medium sized businesses repaid £1.4 billion. Private non-financial companies redeemed £1.9 billion in net finance from capital markets in September, compared to an average net issuance of £0.9 billion in the twelve months to August 2021.

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 (Tables A-E)

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

Individuals borrowed £9.5 billion of mortgage debt, on net, in September from £4.4 billion in August. This is the highest since June 2021 when net borrowing reached a record of £17.1 billion (Chart 1). September’s increase was driven by borrowing ahead of the complete tapering off of lower stamp duty from October. The net borrowing in September was £2.9 billion above the 12 month average to June 2021, when the full stamp duty holiday was in effect. Gross lending increased sharply to £30.7 billion in September, from £20.9 billion in August. Gross repayments also increased to £20.7 billion from £17.7 billion in August.

Approvals for house purchases, an indicator of future borrowing, fell to 72,600 in September, from 74,200 in August. This is the lowest since July 2020, but remains above pre-February 2020 levels. Approvals for remortgaging (which only capture remortgaging with a different lender) rose slightly to 41,500 in September. This remains low compared to the months running up to February 2020, but is the highest since March 2020.

Chart 1: Mortgage lending

Seasonally adjusted flows

The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages fell 4 basis point to 1.78% in September. That is below the rate in January 2020 (1.85%) and the series average since March 2020 (1.83%). The rate on the outstanding stock of mortgages ticked down 1 basis point to a new series low of 2.04%.

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

Individuals borrowed £0.2 billion, on net, in consumer credit in September. Within this, they borrowed an additional £0.6 billion in credit card debt, which is the strongest net borrowing since July 2020 (Chart 2). Individuals also repaid £0.4 billion of ‘other’ forms of consumer credit (such as car dealership finance and personal loans). This is the first net repayment since February 2021.

The annual growth rate for all consumer credit remained weak, but increased to -1.8% in September from -2.4% in August. The annual growth rates of credit cards and other forms of consumer credit also remained weak at -5.5% and -0.3%, respectively.

Chart 2: Consumer credit

Seasonally adjusted

The effective interest rate on interest-charging overdrafts in September increased by 8 basis points to 20.74%. This series has varied between 19.8% and 20.9% since September 2020. Rates on new personal loans to individuals increased by 15 basis points, to 6.02% in September, the highest since March 2020 (6.43%) but remains below the January 2020 level (7.03%). The cost of credit card borrowing was 17.65% in September, having varied between 17.5% and 18.5% since March 2020.

Households’ deposits (M&C Table J):

Households deposited an additional £9.4 billion with banks and building societies in September. This compares to an average net flow into banks and building societies of £8.9 billion between April and August 2021 (Chart 3). The September flow remained relatively strong when compared to pre-pandemic flows: in the year to February 2020, the average inflow was £4.7 billion.