Net mortgage borrowing at its lowest since July

It’s part of an overall drop in spending in the mortgage market, with net borrowing of mortgage debt by individuals dropping from £9.3bn in September to £1.6bn in October. This is the lowest it’s been since July 2021 when individuals repaid £2.2bn of mortgage debt, on net. 

The BoE says this was driven by borrowing being brought forward to September to take advantage of stamp duty land tax relief, before it was completely tapered off. The net borrowing in October was £4.6bn below the 12-month average to June 2021, when the full stamp duty holiday was in effect. 

Additionally, gross lending fell sharply from £30.7bn in September to £19.3bn in October, with gross repayments also falling from £20.6bn to £18.2bn. 

The amount of approvals for remortgaging did, however, go up slightly to 41,600 in October. This figure remains low when compared to the 12-month average up to February 2020, but is the highest since the 42,700 figure recorded in March 2020. 

The effective interest on newly drawn mortgages fell by 19 basis points to 1.59% in October, which is a new series low - with the rate on the outstanding stock of mortgages ticked down one basis point to a new series low of 2.03%. 

As for consumer credit, individuals borrowed £700m in consumer credit in October. The majority of this came from the £600m of additional borrowing on credit cards - the strongest net borrowing since July 2020, with other forms of consumer credit accounting for £100m of net lending. 

Households, meanwhile, deposited an additional £5.5bn with banks and building societies in October, and deposited £900m into National Savings and Investment (NS&I) accounts - which are not captured within household deposits but can act as a substitute for them. 

Combine this with the net flow into both deposits and NS&I accounts in October at a cost of £6.4bn, compared to an average net flow of £11.9bn in the 12 months to September 2021. The combined October net flow was slightly higher than pre-pandemic flows. 

The BoE’s money and credit statistical release also looked into net borrowing by large non-financial businesses in October, finding they borrowed £2bn in October - this is compared to £1.1bn in September. Small and medium-sized non-financial businesses repaid £1.6bn, on net, rising from a £1.5bn net repayment in September. 

As for companies’ deposits with banks, in October non-financial businesses withdrew a net £5.3bn from banks and building societies in all currencies, compared to a net deposit of £4.4bn in September. 

Credit Strategy is pleased to announce the return of the Credit Summit as a live and in-person event. Taking place on 23 March 2022, to find out more information, click here.