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:
- Individuals repaid, on net, £0.1 billion of mortgage debt in May. This followed the record £1.5 billion net repayments in April (if the period since the onset of the Covid-19 pandemic is excluded).
- Net mortgage approvals for house purchases increased from 49,000 in April to 50,500 in May, while approvals for remortgaging saw a rise from 32,500 to 33,600 during the same period.
- The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages rose by 10 basis points, to 4.56% in May.
- Net borrowing on consumer credit by individuals decreased from £1.5 billion in April to £1.1 billion in May.
- During May, households, on net, withdrew £4.6 billion from banks and building societies, which marked the highest level of household withdrawals on record (for this monthly series starting in October 1997). Within the household deposits measure, net withdrawals of interest-bearing sight deposits increased significantly from £5.4 billion in April to £11.4 billion in May. Non-interest bearing sight deposits marked the seventh consecutive month of net withdrawals at £3.3 billion in this month.
- The combined net flow of both household deposits with banks and building societies and National Savings and Investment (NS&I) accounts amounted to -£3.8 billion in May. This was a significant fall from £5.3 billion in April.
- Private non-financial companies (PNFC) made net repayments of £1.6 billion in market finance. Non-financial businesses (PNFCs and public corporations) repaid £0.6 billion of bank and building society loans.
- The net flow of sterling money (known as M4ex) decreased to -£4.6 billion in May, compared to £6.8 billion in April. In contrast, the flow of sterling net lending to private sector companies and households (M4Lex) rose from -£1.0 billion to £0.9 billion within 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):
Individuals repaid, on net, £0.1 billion of mortgage debt in May. The net repayments in May followed the record £1.5 billion net repayments in April (if the period since the onset of the Covid-19 pandemic is excluded). Gross lending rose from £16.4 billion in April to £18.7 billion in May, while gross repayments increased slightly from £18.6 billion to £18.9 billion after three consecutive months of decrease.
Net approvals (that is, approvals net of cancellations) for house purchases, which is an indicator of future borrowing, increased from 49,000 in April to 50,500 in May (Chart 1). Likewise, approvals for remortgaging (which only capture remortgaging with a different lender) saw a rise from 32,500 in April to 33,600 in May.
Chart 1: Mortgage approvals
Seasonally adjusted
The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages rose by 10 basis points to 4.56% in May. The rate on the outstanding stock of mortgages also increased by 7 basis points, from 2.75% in April to 2.82% in May.
Consumer credit (M&C Tables B and C):
Net borrowing of consumer credit by individuals decreased from £1.5 billion in April to £1.1 billion in May (Chart 2). The additional consumer credit borrowing in May was split between £0.6 billion of borrowing on credit cards and £0.5 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 and credit card borrowing decreased slightly to 7.5% and 12.4% in May, from 7.6% and 12.7%, respectively. The annual growth rate for other forms of consumer credit remained at 5.5%.
Chart 2: Consumer credit
Seasonally adjusted
The effective interest rate on interest-charging overdrafts fell by 8 basis points, from 21.86% in April to 21.78% in May. Similarly, the effective rate on new personal loans to individuals slightly decreased by 2 basis points to 8.27%, while the effective rate on interest bearing credit cards rose to a record high of 20.44%.
Households’ deposits (M&C Table J):
In May, households on net withdrew £4.6 billion from banks and building societies, compared to net deposits of £3.7 billion in April. This was the highest level of household withdrawals on record (for this monthly series starting in October 1997). Within the household deposits measure, the net withdrawals of interest-bearing sight deposits significantly increased from £5.4 billion in April to £11.4 billion in May. Non-interest bearing sight deposits marked the seventh consecutive month of net withdrawals at £3.3 billion in May, which decreased from £4.2 billion of net withdrawals in April. These were partly offset by net flows into time deposits amounting to £4.9 billion in May, compared to net inflows of £3.6 billion in April. The net flow into ISAs was at £3.3 billion in May, which fell from the record high of £8.9 billion in April (Chart 3).
Chart 3: Breakdown of households’ deposits (Household M4)
Seasonally adjusted net flow
Households deposited £0.8 billion into National Savings and Investment (NS&I) in May, compared to £1.6 billion of deposits in April. These deposits 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 was -£3.8 billion, a significant decrease from £5.3 billion in April (Chart 4).
Chart 4: Household’s deposits
Seasonally adjusted
The effective interest rate paid on individuals' new time deposits with banks and building societies rose by 12 basis points, to 3.95% in May. The effective rate on the outstanding stock of time deposits also increased by 11 basis points, to 2.56% this month. Conversely, the effective rate on stock sight deposits dropped by 8 basis points from 1.41% in April to 1.33% in May.
Lending to and deposits from businesses
Businesses’ borrowing from banks (M&C Tables F-I):
UK non-financial businesses (PNFCs and public corporations) repaid, on net, £0.6 billion of bank and building society loans (including overdrafts) in May, compared to £0.5 billion of net borrowing in April. Within this measure, net borrowing by large non-financial businesses decreased from £1.6 billion in April to £0.4 billion in May. Net repayments of small and medium sized non-financial businesses (SMEs) was at £1.0 billion in May, down from £1.2 billion in April.
The annual growth rate of borrowing by large businesses rose from 3.0% in April to 3.6% in May, while for SMEs the rate decreased slightly from -4.2% to -4.3% in May (Chart 5).
The average cost of new borrowing from banks by UK PNFCs increased sharply by 33 basis points to an effective interest rate of 6.32% in May, and now sits 429 basis points above the December 2021 rate of 2.03% (when Bank Rate increases began). Likewise, the effective interest rate on new loans to SMEs rose from 6.52% in April to 6.86% in May, 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):
Private non-financial companies (PNFC) made net repayments of £1.6 billion in market finance during May, compared to £3.6 billion of net repayments in April. Within this, on net, companies bought back £2.4 billion of equity, marking the twentieth consecutive month of equity buybacks. This was partly offset by £0.3 billion and £0.5 billion of bonds and commercial paper issuances, respectively (Chart 6).
Chart 6: Net finance raised by PNFCs
Seasonally adjusted net flow
Businesses’ deposits:
In May, UK non-financial businesses deposited £9.8 billion with banks and building societies in all currencies. These were the first net deposits from UK non-financial businesses since August 2022 (£13.8 billion). The effective rate on new time deposits rose significantly from 3.70% to 3.94% in May, while the effective rate on stock sight deposits increased by 2 basis points to 1.92%.
Aggregate money (M4ex) and lending (M4Lex) (M&C Table J)
The net flow of sterling money (known as M4ex) decreased to -£4.6 billion in May, compared to £6.8 billion in April. This was mainly driven by the decrease in the net flow of households’ holdings of money (-£4.6 billion). Net flows of non-intermediate other financial corporations’ (NIOFCs’) holdings of money was £0.4 billion (compared to £3.3 billion in April), which was more than offset by the net flows of PNFCs’ holding of money at -£0.5 billion in May.
In contrast, the flow of sterling net lending to private sector companies and households (M4Lex) rose from -£1.0 billion in April to £0.9 billion in May. This was mainly driven by an increase in the flow of net lending to PNFCs to -£0.1 billion in May, compared to -£1.0 billion in April. The flow of net lending to households also increased from -£0.1 billion in April to £0.6 billion in May.
Queries
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Next release date: 31 July 2023