Money and Credit - September 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 October 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.

Chart 3: Households’ deposits

Seasonally adjusted net flow

The effective interest rate paid on individuals’ new time deposits with banks was broadly unchanged at 0.31%, in September. The effective rates on sight deposits remained at series low of 0.09%. The outstanding stock of time deposits ticked down 2 basis point to new series low of 0.35%.

Lending to and deposits from businesses

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

UK non-financial businesses (PNFCs and public corporations) repaid £0.4 billion in loans from banks in September, compared to a net repayment of £2.8 billion in August. Large non-financial businesses borrowed £1.0 billion in September, compared to a net repayment of £1.7 billion in August. Small and Medium sized enterprises (SMEs) repaid £1.4 billion from a £1.0 billion net repayment in August.

The annual growth rate of borrowing by all large businesses remained weak, but increased to -1.7% in September (Chart 4).

The average cost of new borrowing from banks by all PNFCs fell by 39 basis points to 1.88% in September. The rate in September was slightly below the average seen since March 2020 (1.93%).

The net repayment by SMEs of £1.4 billion in September was the largest on record and the sixth month in a row of repayments by SMEs. The annual growth rate fell slightly further to -0.3% in September, the lowest since July 2015. Interest rates on new loans to SMEs fell by 37 basis points to 2.37% in September, remaining above the average of 2.13% since March 2020, but below January 2020 (3.37%).

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

Seasonally adjusted

Market Finance (M&C Table F):

Private non-financial companies (PNFCs) redeemed £1.9 billion in market finance in September (Chart 5). This compares to an average of £0.9 billion raised in the twelve months to August 2021. There were net redemptions of bonds of £3.0 billion in September, whilst equity and commercial paper saw net issues of £0.7 billion and £0.5 billion, respectively.

Chart 5: Net financed 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 September, UK non-financial businesses deposited £4.4 billion with banks in all currencies, on net, compared to £9.4 billion in August. The effective rates on new time deposits and stock sight deposits for PNFCs remained unchanged at very low levels in September, at 0.07% and 0.04%.

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

Sterling money (known as M4ex) increased by £16.5 billion in September, up from £11.4 billion in August. Households’ holdings of money remained strong with net flows of £9.4 billion, compared to an average of £4.7 billion in the twelve months to February 2020. PNFCs’ holdings (on a seasonally adjusted basis) increased by £4.9 billion, compared to £2.5 billion in August.

Sterling net lending to private sector companies and households, or M4Lex, was little changed in September from the previous month at £3.8 billion.

Queries

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

Next release date: 29 November 2021

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