Drop in borrowing on mortgages and consumer credit products

Overall net borrowing of mortgage debt by individuals decreased month on month between January and February from £2bn to £700m - resulting in the lowest level of mortgage borrowing since July 2021. Gross lending, meanwhile, decreased from £22.9bn to £20.8bn and gross repayments fell slightly from £21.4bn to £20.1bn.  

As for net approvals for house purchases, this increased to 43,500 from 39,600, with this being the first monthly increase in approvals since August 2022. Approvals for remortgaging also rose – going from 25,400 to 28,100.  

Additionally, the “effective” interest rate on newly drawn mortgages increased by 36 basis points from 3.88% to 4.24%, with the rate on the outstanding stock of mortgages rising by 10 basis points to 2.64%.  

Looking at consumer credit borrowing, individuals borrowed an additional £1.4bn in consumer credit compared to £1.7bn in January. The additional consumer credit borrowing seen in the month was split between £600m on borrowing on credit cards – decreasing from £1.1bn in January – and £800m on forms of consumer credit.  

The annual growth rate for all forms of consumer credit, however, increased slightly from 7.5% to 7.7% – making this the highest rate since November 2018. In contrast, the annual growth rate of credit card borrowing fell slightly from 13.5% to 13.1%, while for other forms of consumer credit the growth rate rose from 5.1% to 5.4%.  

Alongside this, the effective interest rate on interest-charging overdrafts rose by 42 basis points to 21.27%, while the effective rate on new personal loans to individuals dropped by 15 basis points to 8.15%.  

Commenting on this, Equifax UK’s chief data and analytics officer Paul Heywood said: “Today’s Bank of England Money and Credit data shows that despite the winter blues consumer borrowing rose for the second month this year.

“This rise came amidst a tough inflationary period, with rates remaining high and placing significant cost pressures on essential goods and services for both consumers and businesses.

“While approvals may have increased, high-borrowing costs continued to depress the mortgage market last month, pushing borrowing levels to their lowest since April 2016. Elsewhere, despite the recent rate rises making offerings more attractive, savings have once again come under threat as consumers look to make ends meet.

“Despite the recent financial turmoil, the UK credit sector is well placed to weather the storm; though it has done little to improve the nation’s spirits in March. While it is unlikely to be reassuring in the short term, as we head into spring there is hope that last week’s base rate increase by the Bank of England will arrest the rate of inflation and bring some stability to the nation’s finances.”

Households also deposited an additional £1.6bn with banks and building societies in February – a cut of over half the £3.3bn deposited in January, while net flows into time deposits dropped slightly – going from £7bn to £6.8bn. 

This was largely offset by net flows of interest-bearing sight deposits at -£6.1bn, marking the fifth consecutive month of negative flows.  

Additionally, households deposited £2bn into National Savings and Investment accounts, with the effective interest rate paid on individuals’ new time deposits with banks and building societies increasing by 11 basis points to 3.62%.  

Turning to business borrowing, UK non-financial businesses repaid – on net – £4.5bn of bank and building society loans, compared to £3.1bn of net repayments in January. This was the largest net repayment from UK non-financial businesses since October 2022. 

Within this, large non-financial businesses repaid, on net, £3.4bn, compared to £3bn of net repayment in January while small and medium sized non-financial businesses repaid £1bn, compared to the £200m of net repayments seen in January.