The consumer credit market remained weak in October while business lending to small- and medium-sized enterprises (SMEs) and the number of mortgage approvals reached record highs.
The Bank of England’s latest money and credit statistics showed that households’ net repayments remained largely unchanged from September at £600m. This was in contrast to net borrowing of £300m in August, and £1.1bn in July.
Meanwhile, although households repaid £15.6bn in consumer credit since the beginning of March, the annual growth rate dropped in October to minus 5.6 per cent. This is a record low since the bank’s data series began in 1994.
“Within consumer credit, the weakness was driven by a net repayment on credit cards of £400m broadly unchanged from the £600m repaid in September,” the Bank of England said in its research.
“Other forms of consumer credit were broadly flat on the month with a small net repayment of £100m.
“The annual growth rates of both components fell further, to minus 13 per cent and minus two per cent, respectively.”
Businesses raised £7.8bn from financial markets in October – a significant increase from the £500m which was raised in September.
Non-financial SMEs drew down £1.7bn in loans on net in October and after borrowing a huge amount since May, the annual growth rate rose to 23.9 per cent last month.
This is the strongest growth rate on record, beating September’s previous record of 22.8 per cent.
Similarly, the mortgage market remained strong in October.
The number of mortgage approvals for house purchases rose from 92,100 in September to 97,500 last month, the highest figure seen since September 2007.
On net, households borrowed an additional £4.3bn secured on their homes, following borrowing of £4.9bn in September.
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“October was clearly still an incredibly busy time for the housing market,” said Rob Barnard, director of intermediaries at Masthaven.
“Despite the Covid-19 restrictions, the stamp duty holiday has continued to fuel activity in the market.
“That demand could be set to continue as we exit the second national lockdown, with many borrowers still looking to secure lending before the March deadline.
“However, the pandemic has wreaked havoc on the personal finances of many consumers across the UK and it’s likely that there will now be thousands more borrowers who could find themselves excluded from high street lenders.”