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 decreased from £4.3 billion to £3.2 billion in December.
- Mortgage approvals for house purchases decreased to 35,600 in December from 46,200 in November, the lowest since May 2020. This marked the fourth consecutive monthly decrease in mortgage approvals.
- The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages increased by 32 basis points, to 3.67% in December.
- Consumers borrowed an additional £0.5 billion in consumer credit, on net, compared with £1.5 billion borrowed in November. Credit card repayments of £0.5bn were more than offset by £1.0 billion of borrowing through other forms of consumer credit.
- Households deposited an additional £3.9 billion with banks and building societies in December. Within this, net flows of interest bearing and non-interest bearing sight deposits remained negative at -£1.3 billion (from -£1.5 billion) and -£0.2 billion (from -£4.7 billion), respectively. These net withdrawals were more than offset by the flow into time deposits of £6.9 billion (down from £10.4 billion in November).
- Non-financial businesses (PNFCs and public corporations) borrowed £1.9 billion of bank loans in December, while non-financial companies (PNFCs) repaid £5.0 billion in market finance.
- The net flow of sterling money (known as M4ex) decreased to -£34.7 billion in December, from -£24.0 billion in November. This was primarily driven by non-intermediate other financial corporations (NIOFCs), with net flows decreasing to -£34.2 billion (from -£24.4 billion in November). Conversely, net lending to the private sector (known as M4Lex) rose to £2.2 billion from -£15.7 billion over the same period.
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 from £4.3 billion to £3.2 billion in December (Chart 1). Gross lending fell from £25.1 billion in November to £23.3 billion in December, while gross repayments were broadly unchanged at £21.0 billion.
Approvals for house purchases, an indicator of future borrowing, decreased to 35,600 in December, from 46,200 in November. This was the fourth consecutive monthly decrease in approvals for house purchases, and the lowest since May 2020. If the onset of the Covid-19 pandemic and period immediately thereafter is excluded, house purchase approvals are at the lowest level since January 2009 (32,400). Approvals for remortgaging (which only capture remortgaging with a different lender) fell to 26,100 in December from 32,600 in November, the lowest level since January 2013 (25,800).
Chart 1: Mortgage lending
Seasonally adjusted flows
The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages increased by 32 basis points to 3.67% in December, the largest monthly increase since December 2021, when Bank Rate increases began. The rate on the outstanding stock of mortgages increased by 12 basis points, to 2.50%.
Consumer credit (M&C Tables B and C):
Individuals borrowed an additional £0.5 billion in consumer credit in December, on net, following £1.5 billion of borrowing in November (Chart 2). This was lower than the previous 6-month average of £1.2 billion. The additional consumer credit borrowing in December was split between £0.5 billion of repayments on credit cards, the first net repayment since December 2021, and £1.0 billion of borrowing through other forms of consumer credit (such as car dealership finance and personal loans), the highest since October 2019 (also £1.0 billion).
The annual growth rate for all consumer credit increased from 7.0% in November to 7.2% in December. The annual growth rate of credit card borrowing rose from 12.2% in November to 12.4% in December, while the annual growth rate of other forms of consumer credit increased from 4.8% in November to 5.0% in December.
Chart 2: Consumer credit
Seasonally adjusted
The effective interest rate on interest-charging overdrafts in December fell by 116 basis points, to 19.77%. Conversely, the effective rate on new personal loans to individuals increased by 29 basis points, to 8.16% in December. The effective rate on interest bearing credit cards also rose to 19.55% in December, from 19.24% in November.
Households’ deposits (M&C Table J):
Households deposited an additional £3.9 billion with banks and building societies in December, compared to £5.9 billion in November. Within the household deposits measure, net flows into time deposits decreased to £6.9 billion in December, from £10.4 billion in November. Net flows of interest bearing sight deposits remained negative at -£1.3 billion in December (from -£1.5 billion), and non-interest bearing sight deposit flows in December rose to -£0.2 billion in December, from -£4.7 billion in November.
During December, households deposited £0.7 billion into National Savings and Investment (NS&I) accounts (compared to £0.3 billion of net withdrawal in November); these 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 was £4.6 billion, a decrease from £5.6 billion in November and below the average monthly net flow of £5.5 billion during the previous six months (Chart 3).
Chart 3: Households’ deposits
Seasonally adjusted net flow
The effective interest rate paid on individuals’ new time deposits with banks and building societies rose by 6 basis points, to 3.33% in December. The effective rate on the outstanding stock of time deposits increased by 35 basis points to 1.67% in December. The effective rates on stock sight deposits increased 20 basis points to 0.83% in December, the largest monthly increase since December 2021.
Lending to and deposits from businesses
Businesses’ borrowing from banks (M&C Tables F-I):
UK non-financial businesses (PNFCs and public corporations) borrowed £1.9 billion of bank and building society loans in December (including overdrafts), on net, compared to £1.5 billion of net borrowing in November. Within this, large non-financial businesses borrowed, on net, £2.7 billion in December, compared to £1.7 billion of net borrowing in November. Small and medium sized non-financial businesses (SMEs) repaid £0.8 billion in December, on net, compared to £0.1 billion of net repayments in November.
The annual growth rate of borrowing by large businesses decreased by 0.1 percentage points to 6.4% in December, while for SMEs it was unchanged at -3.7% (Chart 4).
The average cost of new borrowing from banks by UK PNFCs increased by 55 basis points to an effective interest rate of 4.88% in December, and now sits 285 basis points above the December 2021 rate of 2.03%. The effective interest rate on new loans to SMEs increased by 32 basis points to 5.84% in December (the December 2021 rate was 2.51%), and is the highest on record since the series began in January 2016.
Chart 4: Annual growth of lending to SMEs and large businesses
Seasonally adjusted
Market Finance (M&C Table F):
In December, private non-financial companies (PNFC) repaid a net amount of £5.0 billion in market finance, in comparison to £4.1 billion of net repayments in November. Within this, on net, companies bought back £2.5 billion of equity, and redeemed £1.0 billion and £1.5 billion of bonds and commercial paper, respectively.
Businesses’ deposits:
In December, UK non-financial businesses withdrew, on net, £5.6 billion of deposits from banks and building societies in all currencies, compared to a net withdrawal of £3.9 billion in November.
The effective rate on new time deposits increased by 26 basis points to 2.92%, and the effective rate on stock sight deposits increased by 15 basis points to 1.21%.
Aggregate money (M4ex) and lending (M4Lex) (M&C Table J)
The net flow of sterling money (known as M4ex) decreased to -£34.7 billion in December, from -£24.0 billion in November. This was mainly driven by net flows of non-intermediate other financial corporations’ (NIOFCs’) holdings of money decreasing to -£34.2 billion in December, from -£24.4 billion in November. Net flows of PNFCs’ holdings of money rose to -£4.3 billion, from -£5.5 billion in November.
The flow of sterling net lending to private sector companies and households (M4Lex) increased from -£15.7 billion in November, to £2.2 billion in December. This was driven by an increase in the flow of net lending to NIOFCs, to -£3.1 billion in December from -£20.0 billion in November.
Queries
If you have any comments or queries about this release please email DSD_MS@bankofengland.co.uk.
Next release date: 1 March 2023
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There is a discrepancy between the total of net finance raised and its components due to the seasonal adjustment methodology
