Latest Money and Credit statistics from the Bank of England have shown that mortgage borrowing in July reached its highest level in nearly two years at £2.8 billion, up from £2.6 billion in June, the highest since November 2022 (£3.3 billion).
Mortgage approvals in July were also at a near two-year high, while net consumer borrowing rose to £1.2 billion, up from £0.9 billion in June.
Net mortgage approvals for house purchases, which is an indicator of future borrowing, increased to 62,000 in July, the highest since September 2022 (65,100), and up from 60,600 in June.
Net consumer credit borrowing rose to £1.2 billion in July, from £0.9 billion in June. Net borrowing through credit cards remained stable at £0.5 billion in July, while borrowing through other forms of consumer credit (such as car dealership finance and personal loans) increased to £0.7 billion, from £0.4 billion in June.
Commenting on the statistics, StepChange Chief Client Officer Richard Lane said “It’s encouraging to see signs of consumer confidence increasing, but the fact remains that cost pressures across the board are testing the financial resilience of millions of homeowners and borrowers. Our research shows that one in four mortgage holders are using credit to keep up with their housing payments – a worrying proportion given hundreds of thousands of people are due to roll off cheaper fixed rates in the coming months. Meanwhile, energy prices are due to rise again in October and rents continue to rise at record levels.
“The cost of living crisis will continue to cast a long shadow over many people’s finances, so it’s crucial the Government puts the right measures in place to address financial insecurity, including targeting the affordability of essential bills. For anyone struggling to keep up with their mortgage or facing unmanageable debt, free and impartial advice is available from charities like StepChange.”
Paul Matthews, Senior Director, Risk at Broadstone, said “Confidence appears to be returning to the housing market with mortgage borrowing and net approvals for purchases both reaching their highest level in over 18 months.
“The data covers up to the end of July and we expect the reduction of the Bank of England’s Base Rate at the start of August to further stimulate demand in the market as we enter the busy Autumn period.
“However, we do not expect rates to significantly reduce – at least, to nowhere near levels seen before the hiking cycle – so lenders will still need to exercise caution around affordability as we have seen large increases in mortgage arrears recently.”
“The consumer credit market returned to growth in July which follows historical precedent amid increased spend through the summer holidays. Lenders should be cautious that borrowers aren’t overstretching themselves as we now begin the long run up to Christmas.
“However, given the increase consumer credit was driven by personal loans and auto finance rather than credit cards, it indicates that this uptick in borrowing is being driven by increased confidence in economic stability rather than ‘subsistence borrowing’ which typically manifests itself in credit card volumes.”