The consumer credit market shrunk in September while mortgage approvals and small business lending grew, Bank of England data has shown.
The central bank’s money and credit statistics showed the consumer credit market’s annual growth rate reached -4.6 per cent, the lowest since its series began in 1994.
Consumers made net repayments of £600m last month, in contrast to net borrowing of £300m in August and £1.1bn in July.
Although the repayment in September was small in comparison to the £3.9bn monthly average seen between March and June, this contrasts with an average of £1.1bn of additional borrowing per month in the 18 months to February 2020.
“The weakening in consumer credit reflected an increase in gross repayments, but little change in gross borrowing,” the Bank of England said in the research.
“But both remained lower than their February levels. Gross borrowing was £21.4bn, compared with £25.8bn in February. Repayments increased to £22.3bn from £20.6bn in August, also remaining lower than the February level of £24.6bn.”
Meanwhile, overall business lending dropped from £2.7bn in August to £700m in September – a significant decline from the average increase of £7.7bn between March and June.
However, while larger businesses made net repayments of £5.8bn, small- and medium-sized enterprises (SME) borrowed an additional £1.6bn in September.
On average, SMEs borrowed £11.3bn between May and July, leading the annual growth rate to increase sharply to 22.8 per cent in September. This is the strongest growth rate on record, beating August’s previous record of 21.8 per cent.
The Bank’s data also showed that the mortgage market continued its upward trajectory in September.
The number of mortgage approvals for house purchase rose from 85,500 in August to 91,500 last month, the highest number since September 2007, and up 24 per cent compared to February 2020.
Net mortgage borrowing rose to £4.8bn in September, up from £3bn in August.
“It is promising to see that the recovery of the housing market post-lockdown is continuing as lenders focus on progressing with new and existing cases,” said Steve Seal, managing director at Bluestone Mortgages.
“However, with payment holidays and the government’s furlough scheme coming to an end, lenders will be faced with another priority – supporting borrowers who continue to face financial hardship beyond October.”