Household borrowing falls in October

30th November 2023

Latest Bank of England has found that consumer borrowing fell in October, showing that consumers borrowed £1.3 billion last month compared to £1.4 billion in September.

The decline came as consumers borrowed less on credit cards, with the rate of other forms of credit remaining stable. The data also showed that individuals repaid, on net, £0.1 billion of mortgage debt in October compared to £1.0 billion of net repayments in September.

The data also showed that mortgage approvals totalled 47,400 October, up from 43,700 the month before. Net approvals for remortgaging increased from 20,600 in September to 23,700 in October.

The increase in new home loans came as the Bank held interest rates on the back of inflation falling to 4.6%, leading a number of lenders to offer cheaper mortgage deals. 

Commenting on the figures, Paul Heywood, Chief Data & Analytics Officer at Equifax said “The latest figures from the Bank of England reveal a sluggish October for consumer spending – with total consumer credit borrowing falling to £1.3 billion from September’s already low £1.4 billion. This slump alongside a drop in mortgage lending, suggests consumers may be shying away from spending, ahead of the Christmas period.”

“With this year’s Black Friday and Cyber Monday having just passed, there will be many hoping there will be a return to form for retail, with consumer borrowing likely to play a part here. Equifax’s latest survey data on consumer spending shows nearly a third of consumers would be using BNPL products for Black Friday, Cyber Monday, or Christmas.”

“With consumers feeling the pressure to spend, and economic headwinds persisting, consumers will need to ensure they can afford the repayments and educate themselves on the risks of these products. Equifax and our lending partners will continue to support consumers so that they can live their financial bests.”

Sho Sugihara, CEO and Co-Founder of Fuse, said “Although renewed consumer confidence is welcome, lenders need to ensure that they are proactively analysing not just affordability but also the potential financial vulnerability of borrowers.”

“The full impact of interest rate rises has yet to be felt and, with a third of lenders reporting an increase in borrower defaults over the last 12 months, we’re not out of the woods yet. By utilising a wider range of insights and taking a more holistic view of borrower finances, lenders can protect borrowers at a much earlier stage and offer personalised support to prevent arrears and defaults.”

Katie Pender, Managing Director of Target, said “This month’s statistics seem to show some green shoots of recovery for the housing market and it’s encouraging that net mortgage approvals are up. Borrowers may be feeling more confident now that mortgage interest rates are falling.”

“But the statistics for the end of this year and early into 2024 will be telling. There are still many who will continue to come off historically low fixed rates and onto higher rates, which is why we are seeing approvals for remortgaging also on the rise. Borrowers will no doubt be pinning their hopes on some stability in the market after the past turbulent 12 months. However, with a General Election likely next year and a potential change in Government, all may not be plain sailing. Are this month’s statistics a one-off or a positive trend? Only time will tell. As an industry, what we can do is to work together to support lenders and borrowers with a service based on fast and reliable technology systems which put the customer first.”