Mortgage approvals reach highest since 2007, as consumer credit remains ‘weak’

The Bank of England’s latest money and credit statistics report, released today (30 November), states that mortgage approvals increased to 97,500 from 92,100 in September - their highest peak since September 2007 and 10 times higher than their nadir of 9,400 in May.

Overall, the report added, the mortgage market remained strong in October. On net, households borrowed an additional £4.3bn secured on their homes, following borrowing of £4.9bn in September.

A continued strength in borrowing follows high levels of mortgage approvals for house purchase over recent months. Mortgage borrowing troughed at £200m in April, but has since recovered.

Consumer credit borrowing

Last month borrowers continued to pay down consumer credit debt, making net repayments of £600m. The Bank of England said consumer credit “remained weak” through October, although effective rates on new personal loans increased 37 basis points to 5.15%.

Since the beginning of March, the report said, households have repaid £15.6bn of consumer credit. As a result, the annual growth rate fell further in October to its lowest since it was first tracked in 1994.

Within consumer credit, the Bank of England said the weakness was driven by a net repayment on credit cards of £400m, lower than the £600m repaid in September. Other forms of consumer credit were broadly flat with a small net repayment of £100m.

Reflecting on the figures, Aneesh Varma, founder and chief executive at Aire, which provides credit assessment services, said the figures show a continuation of new normal financial trends – including consumers taking advantage of the stamp duty holiday and low interest rates to move, while others reduce short-term credit commitments.

He added: “Levels of consumer borrowing on credit cards have fallen by almost a fifth since before the pandemic. Lenders might reasonably expect these levels to tick up again during November and December as people put Christmas on credit.

“The fundamental challenge for lenders is that the impact of Covid-19 is not equal. Some people with spotless credit histories and healthy savings going into the pandemic are now defaulting on their credit commitments through no fault of their own, while others have more disposable income now.”