Money and Credit - March 2021

Our monthly Money and Credit statistical release is made up of three parts: broad money and credit, lending to individual and lending to businesses.
Published on 04 May 2021

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 banking system.

Key points

  • Net mortgage borrowing was £11.8 billion in March, the strongest since the series began in April 1993. Mortgage approvals for house purchase were 82,700 in March, lower than the recent peak of 103,100 in November 2020, but higher than in February 2020 (73,000).
  • Individuals continued making net repayments of consumer credit in March (£0.5 billion). The effective rate on new personal loans remained low at 5.03%, compared to 7.03% in January 2020.
  • Households continued depositing significant amounts, with an additional £16.2 billion placed in March. Deposit interest rates remained at historically low levels.
  • Private non-financial companies repaid £6.2 billion of finance to capital markets in March, compared to a monthly average net issuance of £4.5 billion since March 2020. Net bank borrowing by small and medium sized businesses was £0.7 billion in March, whilst large businesses made net repayments of £1.4 billion.

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):

Mortgage borrowing was very strong in March with individuals borrowing an additional £11.8 billion secured on their homes (Chart 1). This was the strongest net borrowing on record since the series began in April 1993, with the previous peak in October 2006 (£10.4 billion). The strength in net lending reflected gross lending also reaching a new series high in March (£35.6 billion). The strong borrowing was driven by the expected ending of the temporary stamp duty tax relief at the end of March, which has now been extended to the end of June.

Chart 1: Mortgage lending

Seasonally adjusted flows

The strength in mortgage borrowing follows a large number of approvals for house purchase. These approvals have fallen from a recent peak of 103,100 in November to 82,700 in March, but they remained relatively strong. In February 2020, there were 73,000 approvals for house purchase. Approvals for remortgage (which only capture remortgaging with a different lender) remained broadly unchanged at 34,800.

The ‘effective’ rate – the actual interest rate paid – on newly drawn mortgages rose 4 basis points to 1.95% in March. That is above the rate in January 2020 (1.85%), and compares to a series low of 1.72% in August 2020. The rate on the outstanding stock of mortgages remained broadly unchanged at a series low of 2.08%.

Consumer credit (M&C Tables B and C):

Individuals have made significant net repayments of consumer credit since March 2020 (Chart 2). A further net repayment of £0.5 billion in March this year was, however, a little smaller than seen on average each month over the past year (£1.9 billion). It was also a smaller net repayment than in March 2020 (£4.1 billion), so the annual growth rate – while remaining weak at -8.6% in March – rose from its series low of -10% in February.

Within consumer credit, the weakness on the month reflected net repayments on credit cards (£0.4 billion) and other forms of consumer credit (£0.2 billion). The annual growth rates of both components have risen from series lows, but remained weak at -18.5% and -4.1%, respectively.

Chart 2: Consumer credit

Seasonally adjusted

The effective interest rate on consumer credit products fell a little in March. The effective interest rate on interest-charging overdrafts fell by 6 basis points to 20.31% in March, within the 20-21% range seen since September 2020. Rates on new personal loans to individuals fell further to 5.03% in March, compared to an interest rate of 7.03% in January 2020. The cost of credit card borrowing fell by 17 basis points to 18.01% in March.

Households’ deposits (M&C Table J):

Households’ flows into deposit-like accounts remained strong in March. The net flow of deposits, at £16.2 billion, was a little higher than the monthly average of £15.2 billion since March 2020. There was a small withdrawal (£0.4 billion) from National Savings and Investment (NS&I) accounts in March, which are not captured within household deposits but can act as a substitute for them. The combined flow into both deposits and NS&I accounts in March (£15.7 billion) was similar to averages seen since July 2020, but remained well above the monthly average of £5.6 billion in the six months to February 2020.

The effective interest rate paid on individuals’ new time deposits with banks increased by 15 basis points to 0.49%, but remained close to series lows. The effective rates on the outstanding stock of both sight and time deposits were broadly flat, at 0.11% and 0.46%, respectively, and remained at series lows.

Lending to and deposits from businesses

Market Finance (M&C Table F):

Private non-financial companies (PNFCs) repaid £6.2 billion of financial market issuance in March, on net (Chart 3). This was the highest amount repaid in one month since the start of the collection in 2003, and compares to the monthly average of £4.5 billion net issuance since March 2020. There were net redemptions of both commercial paper and bonds, at £4.3 billion and £2.5 billion, respectively. Net issuance of equity remained positive in March at £0.6 billion, although this was a little lower than in February (£1.0 billion).

The weakness in net issuance reflected strong gross repayments. At £17.1 billion, gross repayments reached the highest level on record, and this offset strength in gross issuance. Gross repayments of commercial paper were strongest, followed by bonds.

Chart 3: Net finance raised by PNFCs1

Seasonally adjusted net flow

Footnotes

  • There is a discrepancy between the total of net finance raised and its components due to the seasonal adjustment methodology.

Businesses’ borrowing from banks (M&C Tables F-I):

Overall, non-financial corporates repaid £0.6 billion of bank loans, on net, in March. That is weaker than the £0.7 billion borrowed in February, and the £0.2 billion average borrowed in the six months to February 2020. The average cost of new borrowing from banks by all PNFCs fell by 52 basis points, to 2.44%. This remains higher than the average seen since March 2020 and compares against a series low of 1.05% in May 2020. The fall in March was driven by a 68 basis points decrease on the cost of floating-rate loans – which account for the majority of corporate borrowing – to 2.46%. The cost of fixed rate loans (2.34%) remained lower than January 2020, by 118 basis points.

Borrowing by small and medium sized non-financial businesses (PNFCs and public corporations) in March was similar to recent months, as they drew down an extra £0.7 billion in loans. As a result, the annual growth rate reached a new series high at 26.0% (Chart 4). Interest rates on new loans to SMEs fell to 2.28% in March. This remained well below the rate of 3.37% in January 2020.

Large non-financial businesses made net repayments in March (£1.4 billion). This continues the trend of net repayments seen during much of 2020, but by a significantly smaller amount. The annual growth rate of borrowing by all large businesses dropped sharply in March, to -10.2% from -1% in February. In addition to continued net repayments in March 2021, the growth rate has fallen because strong net borrowing in March 2020 is no longer boosting the growth rate.

Chart 4: Annual growth of lending to SMEs and large businesses

Seasonally adjusted

Businesses’ deposits with banks:

UK businesses’ deposits in all currencies increased by £13.4 billion in March, in line with averages seen during 2020 (Chart 5). This increase is in contrast to net outflows seen in January and February, at -£8.9 billion and -£3.7 billion, respectively. The effective rates on new time deposits and stock sight deposits for PNFCs remained unchanged at very low levels in March, at 0.06% and 0.05%, respectively.

Chart 5: Businesses’ deposits

Non-seasonally adjusted net flow

Aggregate money (M4ex) and lending (M4Lex) (M&C Table J)

Sterling money (known as M4ex) increased by £12.7 billion in March, down from £16.3 billion in February. Households’ holdings of money remained strong with net flows of £16.2 billion, and PNFCs’ holdings (on a seasonally adjusted basis) increased by £1.4 billion, up from £1.1 billion in February.

Sterling net lending to private sector companies and households, or M4Lex, rose to £2.7 billion in March, recovering from a weak February that saw flows of -£7.0 billion.

Queries

If you have any comments or queries about this release please email dsd_ms@bankofengland.co.uk.

Next release date: 2 June 2021

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