Mortgage borrowing stalled in May, while consumer credit volumes rose and businesses began to make their first loan repayments in more than a year, according to the latest Bank of England Money and Credit statistics.
Net mortgage borrowing reached £6.6bn in May – up from £3bn in April, but still far below the record £11.4bn that was recorded in March ahead of the end of the stamp duty exemption.
Meanwhile, consumer borrowing reached £300m in May, as consumers took out more credit than they paid off for the first time since August 2020.
Read more: UK firms raise £615bn during Covid-19 crisis
The effective rate on new personal loans was 5.61 per cent – down from 7.03 per cent in January 2020.
The Bank of England also revealed that large businesses made net repayments of £1.9bn of loans in the month of May, while small- and medium-sized enterprises paid off £400m of loans. This represented the first business loan repayments in more than a year, the bank said.
Mortgage brokers noted that the high demand for mortgages in May indicates that there is still a lot of pent up demand in the housing market, while other financial specialists pointed out that the rise in consumer credit pointed towards a loosening of the purse strings after a frugal year for most households.
Read more: Assetz Capital lends £370m through CBILS
“The pandemic will have had a lasting impact on thousands – if not millions – of people’s finances, and even though many people are returning to work, for some it will take them a long time to recover financially from the crisis,” said Steve Seal, managing director at Bluestone Mortgages.
“The coronavirus crisis has left many people out of work, with a reduced income, or with adverse credit – factors which can be extremely damaging to an individual’s credit score. As a result, we expect more people to be locked out of mainstream lending in the long-run, and subsequently turn to the specialist market for support.
“This is where advisers and lenders must sit up and prepare for the rise in consumer demand that is forecast for the long-term. There’s a real growth opportunity here for advisers and lenders, but gearing up now will be crucial if both sides of the market are to capitalise on this.”
Read more: LendInvest plans £300m IPO