Money and Credit - June 2022

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 UK banking system.

Key points:

• Net borrowing of mortgage debt by individuals decreased to £5.3 billion in June, down from £8.0 billion in May but remains above its 12-month pre-pandemic average up to February 2020 of £4.3 billion.
• Consumers borrowed an additional £1.8 billion in consumer credit, on net, of which £1.0 billion was new lending on credit cards.
• Small and medium sized businesses repaid £0.4 billion of bank loans in June, more than the £0.2 billion repaid in May and the 15th consecutive month of net repayments. Large non-financial businesses’ borrowed £1.3 billion of bank loans in June compared to £1.6 billion repayments in May
• Private non-financial companies (PNFCs) redeemed £9.4 billion in net finance from capital markets. Within this there were, on net, bond redemptions at a record £5.8 billion, equity buybacks of £3.5 billion, and commercial paper redemptions of £0.1 billion.
• The net flow of sterling money (known as M4ex) decreased to -£2.9 billion in June compared with £20.4 billion in May. Households’ holdings of money saw net flows of £1.5 billion in June, compared with £5.2 billion in May. Household interest bearing sight deposits decreased to £0.3 billion in June, the lowest since April 2018 (-£1.4 million).
• The net flow of sterling lending to private sector companies and households (known as M4Lex) decreased to -£3.8 billion in June, compared to £13.4 billion in May.

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.

Please note: over the coming months, a review of the seasonally adjusted series will be conducted to assess and adjust for the effects of the Covid-19 pandemic on the seasonally adjusted series since the onset of the pandemic in March 2020. A separate review will assess and adjust for the impact of the Queen’s Platinum Jubilee on May, June and potentially July 2022 data. Both reviews may lead to revisions in the published seasonally adjusted series.

Lending to individuals

Mortgage lending (M&C Tables D and E):

Net borrowing of mortgage debt by individuals decreased to £5.3 billion in June, from £8.0 billion in May (Chart 1). This is above the pre-pandemic average of £4.3 billion in the 12 months up to February 2020. Gross lending decreased to £25.4 billion in June from £28.1 billion in May, and gross repayments decreased slightly to £20.3 billion from £21.2 billion.

Approvals for house purchases, an indicator of future borrowing, decreased to 63,700 in June, from 65,700 in May, which is below the 12-month pre-pandemic average up to February 2020 of 66,700. Approvals for remortgaging (which only capture remortgaging with a different lender) decreased to 44,000 in June, from 47,200 in May. This also remains below the 12-month pre-pandemic average up to February 2020 of 49,500.

The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages increased by 20 basis points to 2.15% in June. The rate on the outstanding stock of mortgages ticked up 4 basis points, to 2.11%.

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

Individuals borrowed an additional £1.8 billion in consumer credit in June, on net, following £0.9 billion of borrowing in May (Chart 2). This is above the 12-month pre-pandemic average up to February 2020 of £1.0 billion. The additional consumer credit borrowing in June was split between £1.0 billion on credit cards, and £0.8 billion through other forms of consumer credit (such as car dealership finance and personal loans).

The annual growth rate for all consumer credit increased to 6.5% in June; the highest rate since May 2019 (6.5%). The annual growth rate of credit card borrowing was 12.5%, while other forms of consumer credit was 4.1%. These were the highest rates since November 2005 (12.6%) and March 2020 (5.6%) respectively.

Rates on new personal loans to individuals increased by 22 basis points to 6.71% in June, but remains below the February 2020 (pre-pandemic) level of 6.9%. The effective rate on interest bearing credit cards increased by 19 basis points to 18.56% in June from 18.37% in May, and sits 1 basis point above the February 2020 level. The effective interest rate on interest-charging overdrafts in June was little changed at 20.23%.

Households’ deposits (M&C Table J):

Households deposited an additional £1.5 billion with banks and building societies in June, compared to £5.2 billion in May. Within the household deposits measure, interest bearing sight deposits flows decreased to £0.3 billion, which is the lowest since April 2018 (-£1.4 million). During June, households also deposited £0.4 billion into National Savings and Investment (NS&I) accounts (compared to £0.3 billion in May), which are not captured within household deposits with banks and building societies but can act as a substitute for them. The combined net flow into both deposits and NS&I accounts in June was £1.9 billion, down from £5.6 billion in May and below the average monthly net flow of £4.7 billion during the 12-month pre-pandemic period up to February 2020 (Chart 3).

The effective interest rate paid on individuals’ new time deposits with banks and building societies rose from 1.25% in May to 1.58% in June. The effective rate on the outstanding stock of time deposits ticked up 4 basis points to 0.54% in June. The effective rates on stock sight deposits ticked up 3 basis points to 0.21%.

Lending to and deposits from businesses

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

UK non-financial businesses (PNFCs and public corporations) borrowed £0.9 billion of bank and building society loans in June (including overdrafts), on net, compared to £1.8 billion of repayments in May. Within this, large non-financial businesses borrowed, on net, £1.3 billion in June, compared to £1.6 billion repayments in May. Small and Medium sized non-financial businesses (SMEs) repaid £0.4 billion in June, on net, compared to a £0.2 billion net repayment in May. The net loan repayment by SMEs in June marked the fifteenth consecutive month of net repayments.

The annual growth rates of borrowing by large businesses and SMEs was little changed at 6.7% and -4.7% in June, respectively (Chart 4).

The average cost of new borrowing from banks by UK PNFCs increased 25 basis points to an effective interest rate of 3.11% in June, and now sits 56 basis points above the February 2020 rate of 2.56%. Effective interest rates on new loans to SMEs ticked up 5 basis points to 3.49% in June, ticking up slightly above February 2020 rates (3.44%).

Market Finance (M&C Table F):

Private non-financial companies (PNFCs) redeemed net £9.4 billion of market finance (the sum of net equity, bond and commercial paper issuance) in June (Chart 5), in comparison to £5.1 billion redeemed in May. Within this, companies bought back £3.5 billion of shares in June, redeemed a record £5.8 billion of bonds (the highest net redemption since the series began in 2003), and redeemed £0.1 billion of commercial paper, on net.

Businesses’ deposits:

In June, UK non-financial businesses deposited £10.5 billion, on net, with banks and building societies in all currencies, compared to deposits of £15.0 billion in May.

The effective rate on new time deposits increased by 25 basis points to 1.11%, and the effective rate on stock sight deposits increased by 5 basis points, to 0.30%.

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

The flow of sterling money (known as M4ex) decreased to -£2.9 billion in June, compared with £20.4 billion in May. PNFCs’ holdings of money saw net flows of -£5.4 billion, compared to £7.1 billion in May.

The flow of sterling net lending to private sector companies and households, or M4Lex, decreased to -£3.8 billion in June. This was lower than the £13.4 billion increase in lending in May.

Queries

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

Next release date: 30 August 2022