Money and Credit - March 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:

• Mortgage lending to individuals fell from a net flow of £0.7 billion in February to net zero in March. Looking at the period prior to the onset of Covid-19 in March 2020, this is the lowest level of net borrowing since June 2011 (£0.3 billion of net repayment).
• Net mortgage approvals for house purchases rose significantly to 52,000 in March, from 44,100 in February.
• The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages increased by 17 basis points, to 4.41% in March.
• Consumers borrowed an additional £1.6 billion in consumer credit in March, on net, compared with £1.5 billion borrowed during February.
• Households withdrew £4.8 billion from banks and building societies in March. Within this, net flow into interest-bearing sight deposits significantly decreased from -£5.1 billion in February to -£14.4 billion in March, but was partly offset by strong net flows into time deposits at £6.5 billion.
• During March, households deposited £3.5 billion into National Savings and Investment (NS&I) accounts, the highest since September 2020 (£5.0 billion).
• Non-financial companies (PNFCs) repaid £2.6 billion in market finance, while non-financial businesses (PNFCs and public corporations) borrowed £2.5 billion in bank loans in March.
• The net flow of sterling money (known as M4ex) fell to -£18.1 billion in March, from -£4.3 billion in February. The decrease was driven by a reduction in holdings of money by non-intermediate other financial corporations’ (NIOFCs’) (-£7.6 billion), PNFCs (-£5.8 billion), and households (-£4.8 billion). Net lending to the private sector (known as M4Lex) increased, to -£0.7 billion from -£17.7 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):

Borrowing of mortgage debt by individuals fell further from a net flow of £0.7 billion in February to net zero in March. This was the lowest level since July 2021 (£1.8 billion of net repayment). If the period since the onset of the Covid-19 pandemic is excluded, net borrowing of mortgage debt was at the lowest level since June 2011 (£0.3 billion of net repayment). Gross lending increased slightly from £20.4 billion in February to £20.6 billion in March, while gross repayments fell from £19.9 billion to £19.3 billion¹.

Net approvals (that is, net of cancellations) for house purchases, an indicator of future borrowing, significantly rose to 52,000 in March from 44,100 in February, yet remains below the monthly average for 2022 of 62,700 (Chart 1). Approvals for remortgaging (which only capture remortgaging with a different lender) also increased, to 32,200 in March from 28,200 in February.

Chart 1: Mortgage approvals

Seasonally adjusted

The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages increased by 17 basis points, from 4.24% to 4.41% in March. The rate on the outstanding stock of mortgages rose by 9 basis points, to 2.73%.

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

Individuals borrowed an additional £1.6 billion in consumer credit in March, on net, compared to £1.5 billion of borrowing in February (Chart 2). The additional consumer credit borrowing in March was split between £0.7 billion of borrowing on credit cards, which was broadly unchanged from February, and £0.9 billion of borrowing through other forms of consumer credit (such as car dealership finance and personal loans).

The annual growth rate for all consumer credit marked the fifth consecutive month of increase, from 7.7% in February to 7.9% in March. The annual growth rate of credit card borrowing fell from 13.2% to 12.8% in March, while for other forms of consumer credit the growth rate rose from 5.4% in February to 5.8% in March.

The effective interest rate on interest-charging overdrafts in March decreased by 27 basis points, to 21.07%. The effective rate on new personal loans to individuals dropped by 36 basis points, to 7.79% in March. The effective rate on interest bearing credit cards rose to 20.29% in March, from 20.11% in February, the highest rate on record.

Households’ deposits (M&C Table J):

Households withdrew, on net, £4.8 billion from banks and building societies in March, compared to net deposits of £2.6 billion in February. Within the household deposits measure, net flow of interest-bearing sight deposit significantly decreased from -£5.1 billion in February to -£14.4 billion in March. Non-interest bearing sight deposits flows marked the fifth consecutive months of negative flows (withdrawals) at -£2.0 billion in March. These were partly offset by net flows into time deposits, which remained strong at £6.5 billion (Chart 3).