Money and Credit - July 2023

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 30 August 2023

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 increased for the third consecutive month to £0.2 billion in July, from £0.1 billion in June.
  • Net mortgage approvals decreased from 54,600 in June to 49,400 in July, while approvals for remortgaging slightly increased from 39,100 to 39,300 during the same period.
  • The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages rose by a further 3 basis points, to 4.66% in July.
  • Net borrowing of consumer credit by individuals fell to £1.2 billion in July, down from £1.6 billion in the previous month.
  • During July, households deposited an additional £0.4 billion with banks and building societies, compared to £3.8 billion of deposits in June. This was mainly driven by net flows of £10.1 billion into interest-bearing time deposit accounts. Net flows into ISAs saw an increase to £4.3 billion in July, from £2.9 billion in June. These inflows were mostly offset by net outflows from interest bearing and non-interest bearing sight accounts of £10.2 billion and £0.8 billion respectively.
  • Households withdrew a net £0.1 billion from National Savings and Investment (NS&I) accounts, following net withdrawals of £0.2 billion in June.
  • Private non-financial companies (PNFC) repaid on net £1.6 billion in market finance in July, down from £2.9 billion of net repayments in the previous month.
  • Net borrowing of bank and building society loans (including overdrafts) by UK non-financial businesses (PNFCs and public corporations) amounted to £0.5 billion in July, following net repayments of £6.0 billion in June.
  • The net flow of sterling money (known as M4ex) was -£0.3 billion in July, compared to -£3.5 billion in June, and was mainly driven by net flows of -£2.4 billion by non-intermediate other financial corporations (NIOFCs). The flow of sterling net lending to private sector companies and households (M4Lex) increased to £6.9 billion in July, following a fall to -£0.5 billion in June.

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 increased for the third consecutive month, from £0.1 billion in June to £0.2 billion in July. Gross lending decreased from £20.4 billion in June to £18.7 billion in July, while gross repayments fell from £19.7 billion to £19.1 billion during the same period.

Net approvals (that is, approvals net of cancellations) for house purchases, which is an indicator of future borrowing, fell to 49,400 in July, from 54,600 in June (Chart 1). Approvals for remortgaging (which only capture remortgaging with a different lender) saw a slight increase to 39,300 in July, from 39,100 in the previous month.

Chart 1: Mortgage approvals

Seasonally adjusted

The ‘effective’ interest rate – the actual interest paid – on newly drawn mortgages saw a 3 basis point increase to 4.66% in July, while the rate on the outstanding stock of mortgages rose by 5 basis points to 2.97%.

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

Net borrowing of consumer credit by individuals decreased to £1.2 billion in July, from £1.6 billion in the previous month (Chart 2). This was driven by a fall in borrowing through other forms of consumer credit (such as car dealership finance and personal loans) to £0.6 billion in July, down from £1.0 billion in June, while borrowing on credit cards remained broadly unchanged for the third consecutive month at £0.6 billion.

The annual growth rate for all consumer credit saw a slight decrease to 7.3% in July, compared to 7.5% in June. Similarly, the annual growth rate for credit card borrowing and for other forms of consumer credit declined to 11.7% and 5.5% respectively, down from 11.9% and 5.6% in June.

Chart 2: Consumer credit

Seasonally adjusted

 

The effective interest rate on interest-charging overdrafts decreased by 7 basis points and now sits at 21.70%. In contrast, the effective rate on interest bearing credit cards rose by 34 basis points to a new record high of 20.76%, while the effective rate on new personal loans to individuals increased to 8.61% in July, from 8.41% in June.

Households’ deposits (M&C Table J):

Households deposited an additional £0.4 billion with banks and building societies in July, down from £3.8 billion in June. This was mainly driven by net flows of £10.1 billion into interest-bearing time deposit accounts, compared to £6.5 billion in June. Similarly, net flows into ISAs increased to £4.3 billion in July, up from £2.9 billion in June. These increased inflows were mostly offset by net outflows of £10.2 billion from interest-bearing sight deposit accounts. Households also withdrew a net £0.8 billion from non-interest bearing sight accounts in July, following net deposits of £4.2 billion in June (Chart 3).

Chart 3: Breakdown of households’ deposits (Household M4)

Seasonally adjusted net flow

During July, households withdrew a net £0.1 billion from National Savings and Investment (NS&I) accounts, compared to £0.2 billion of net withdrawals in June. Deposits into NS&I accounts are not captured within households’ deposits with banks and building societies but can act as a substitute for them. The combined net flow of both household deposits with banks and building societies and NS&I accounts amounted to £0.3 billion in July, a significant decrease from £3.6 billion in the previous month (Chart 4).

Chart 4: Household deposits

Seasonally adjusted net flow

The effective interest rate paid on individuals’ new time deposits with banks and building societies saw a significant 65 basis point increase, from 4.29% in June to 4.94% in July. The effective rate on the outstanding stock of time deposits increased by 23 basis points during the same period, and now sits at 2.94%. Similarly, the effective rate on stock sight deposits rose by 20 basis points to 1.66%.

Lending to and deposits from businesses

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

UK non-financial businesses (PNFCs and public corporations) borrowed, on net, £0.5 billion of banks and building society loans (including overdrafts) in July, following net repayments of £6.0 billion in the previous month. Within this measure, net borrowing by large non-financial businesses amounted to £0.9 billion, compared to net repayments of £4.7 billion in June. In contrast, small and medium sized non-financial businesses (SMEs) made net repayments for the eighth consecutive month, with net repayments of £0.3 billion in July.

The annual growth rate of borrowing by large businesses saw an increase to 1.3% in July, up from 0.6% in June, while for SMEs the rate increased slightly from -4.3% to -4.2% during the same period (Chart 5).

The average cost of new borrowing from banks by UK PNFCs saw a 36 basis point increase to 6.72% in July, and now sits 469 basis points above the December 2021 rate of 2.03% (when Bank rate increases began). The effective interest rate on new loans to SMEs rose by 6 basis points, from 7.13% in June to 7.19% in July, compared to 2.51% in December 2021.

Chart 5: Annual growth of lending to SMEs and large businesses

Seasonally adjusted

Market Finance (M&C Table F):

During July, private non-financial companies (PNFC) repaid a net £1.6 billion in market finance, down from £2.9 billion of net repayments in the previous month. This was the sixth consecutive month of net repayments in market finance by private non-financial companies (PNFC). Within this measure, equity buybacks by companies increased from £1.9 billion in June to £2.3 billion in July. Companies also redeemed £0.1 billion of commercial paper, compared to £1.2 billion net redemptions in June. These were partly offset by £0.8 billion of bond issuances, an increase from £0.2 billion of bond issuances in June (Chart 6).

Chart 6: Net finance raised by PNFCs

Seasonally adjusted net flow