Bank of England (BOE) figures show consumer debt levels rose to an all-time high of £225 billion last month, increasing by £1.3 billion between September and October according to the BOE’s latest statistics.
The net flow of consumer credit was above the £1.1 billion average since July 2018.
The figures reveal that banks and building societies made 64,602 approvals for mortgages in October – 2% lower than the previous month and the weakest since March. The average rate on new mortgages is 1.96%, compared to the 2.39% average on existing home loans. Meanwhile, the pace of non-mortgage borrowing has accelerated for the first time in over a year. Britain’s annual rate of consumer credit was measured at 6.1% in the year to October, up from 5.9% in the year to September. However, borrowing was still well below the 10.9% peak in November 2016.
Lending in the mortgage market continues to be steady, around the trend of the past three years. Net mortgage borrowing picked up on the month to £4.3 billion, whilst mortgage approvals for house purchase fell slightly to 65,000.
Commenting on the figures Mark Gordon, Director of Money at comparethemarket.com said “The number of mortgages approved each month continues to hover just below or around the 130,000 mark. This is far from the only takeaway from today’s numbers, however; house purchases are dropping, which appears to indicate that the market is being held up by re-mortgaging.”
“With historically competitive rates and attractive deals there are plenty of incentives for buyers to step onto the property ladder. Rates are expected to stay low for the time being – but they won’t stay low forever. Potential buyers and those looking to re-mortgage would be well advised to shop around online to take full advantage of the best deals available.”
David Finch, Chief Revenue Officer at TransUnion in the UK said “The latest Money and Credit statistics from the Bank of England depict a resilient economy, despite the impending general election and continued Brexit negotiations. Consumers borrowed £1.3 billion in October to purchase goods and services, with annual growth at 6.1%, up from 5.9% in September. This is the first increase since June 2018, indicating that consumers are gaining in confidence.”
“That said, with the holiday season approaching, we’re likely to see this growth increase, and there is a danger of consumers overextending themselves – particularly with the use of credit cards which saw net borrowing rise by £0.3 billion in October – so lenders need to be rigorous in their affordability checks to avoid that happening.”
“The mortgage market annual growth rate remained steady, with lending up £0.4 billion from September – a positive sign given the wider political uncertainty. However, a slight decline in mortgage approvals could suggest an impending decrease in house purchases. That would be unsurprising as we head towards to the new Brexit deadline but equally may just be an affirmation that mortgage lenders are scrutinising applications to ensure prospective buyers can sustain their payments in the long term.”