Consumer credit increases

Latest Bank of England Money and Credit data has shown that consumer credit by individuals amounted to £1.3 billion in August, a slight increase from £1.2 billion in July, which continues to be the highest since November 2022.

August consumer credit borrowing slightly dropped to 7.6% year-on-year from the 7.8% seen in July.

The data also showed that Individuals borrowed, on net, £2.9 billion of mortgage debt in August, compared to £2.8 billion in July.

Net mortgage approvals for house purchase rose 3.8% from 62,500 in July to 64,900 in August, the highest level since August 2022 (72,000). Similarly, approvals for remortgaging increased 7.9% from 25,200 to 27,200 over the same period.

The annual growth rate for net mortgage lending rose for the sixth month in a row, from 0.6% in July to 0.7% in August, the highest since August last year, when the figure hit 1%.

Commenting on the data, James O’Donnell, Director of Research & Consulting at TransUnion said  “The Bank of England’s latest Money and Credit report for August 2024 shows a continued rise in mortgage borrowing, with individuals borrowing a net £2.9 billion, slightly up from £2.8 billion in July, which continues to be the highest since November 2022. Mortgage approvals for house purchases remain strong, with an increase from 62,500 in July to 64,900 in August – the highest level since August 2022.

“The increase in house purchase activity should also be taken in context of normal market seasonality. We’re moving away from peak summer activity into the winter low period. The question becomes one of whether borrowing activity will grow over Q4 due to lower interest rates, thus bucking the winter seasonal trend? We will be watching this closely over the next few months.

“Consumer credit borrowing remains strong, with net borrowing reaching £1.3 billion, building on the £1.2 billion reported in July, but the rate of growth appears to be slowing down with August net borrowing slightly dropping to 7.6% year-on-year from the 7.8% seen in July. This indicates that we’re seeing balance growth stabilise on the back of lower price inflation in recent months across most consumer goods and services, and consumers might finally be finding their feet on stable ground. With these trends, lenders must remain vigilant in managing risk and ensuring responsible lending practices as these economic conditions continue to evolve.”

John Phillips, CEO of Spicerhaart and Just Mortgages, said “The latest Bank of England Money and Credit data for August provides a cautiously optimistic outlook for the housing and mortgage market. A net increase of £2.9 billion in mortgage borrowing and a rise in approvals to 64,900 – the highest since August 2022 – reflects strong demand, despite wider economic challenges. This is particularly encouraging as we’ve seen recent reductions in swap rates, which have helped to stabilise mortgage pricing, creating more favourable conditions for both homebuyers and those looking to remortgage.

“The increase in remortgaging approvals suggests that more consumers are taking advantage of these improved rates, locking in better deals. As brokers, we are well-positioned to guide borrowers through this landscape, ensuring they make informed decisions at a crucial time. While consumer credit borrowing has seen a slight uptick, it’s evident that households are consolidating their finances, preparing to manage the current economic pressures.

“Looking ahead, the combination of falling swap rates and rising mortgage approvals signals a more positive outlook for the mortgage market. Additionally, the increase in borrowing by private non-financial corporations (PNFCs) suggests growing business confidence, which could help stimulate broader economic growth as we move towards the end of the year.”