In August, small- and medium-sized enterprises (SMEs) made the largest loan repayment to banks on record while the consumer credit market remained weak and mortgage approvals fell.
The Bank of England’s money and credit statistics have revealed that the net repayment by SMEs to banks in August reached £1bn, the largest on record, equal with March 2014. This represented the fifth consecutive month of repayments by SMEs and follows average net borrowing of £3.2bn per month between March 2020 and April 2021.
The annual growth rate for all consumer credit remained low, but rose slightly from -2.6 per cent in July to -2.4 per cent in August. The annual growth rates of credit cards and other forms of consumer credit also remained weak at -7.9 per cent and -0.1 per cent, respectively.
Individuals borrowed £400m in consumer credit in August, which consisted of an additional £200m of other forms of consumer credit, such as personal loans and car dealership finance, and £200m in credit card debt.
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Meanwhile, approvals for house purchases, an indicator of future borrowing, dropped from 75,100 in July to 74,500 last month, the lowest since July 2020, but remains above pre-February 2020 levels.
Approvals for remortgaging with a different lender increased to 39,700 in August, which is the highest since March 2020 but is low compared to the months running up to February 2020.
Individuals borrowed £5.3bn of mortgage debt on net in August, which follows a rare net repayment of £1.8bn in July and is £1.2bn fewer than June’s peak when the full stamp duty holiday was in effect. Gross lending increased from £16.6bn in July to £21.5bn last month.
“Mortgage approvals continue to sink steadily, giving a sign that the volume of property sales is on course to return to pre-pandemic norms,” said Paul Stockwell, chief commercial officer at Gatehouse Bank.
“Record high transaction levels seen in recent months, caused by a perfect storm of pent-up demand, the race for space and the stamp duty holiday, look unlikely to be surpassed over the remainder of the year.
“Instead, this gradual fall in mortgage approvals suggests that the reinstatement of stamp duty charges, rising property prices and the cost of moving are once again becoming major considerations for potential buyers.”