Dire borrowing and credit data from Bank of England

There’s been an alarming set of figures in the Bank of England’s latest Money and Credit report, which relates to September.

Net borrowing of mortgage debt by individuals decreased from £1.1 billion in August to -£0.9 billion in September – the lowest since April 2023 - while net mortgage approvals for house purchases fell to 43,300 in September, the lowest level since January 2023. 

Net approvals for remortgaging fell to 20,600 in September, the lowest level since January 1999 - almost 25 years.

The ‘effective’ interest rate – the actual interest paid – on newly drawn mortgages saw a 19 basis point increase and now sits at 5.01 per cent.

Net borrowing of consumer credit by individuals amounted to £1.4 billion in September, down from £1.7 billion in the previous month, while households withdrew £0.7 billion from banks and building societies in September. 

This was driven by net outflows from interest-bearing and non-interest bearing sight deposit accounts of £6.2 billion and £2.8 billion respectively. This is partly offset by net flows of £5.3 billion into time deposit accounts.

Tomer Aboody, director of property lender MT Finance, says: “With the future path of interest rates still uncertain and much higher compared with recent years, it is no surprise to see lower levels of mortgage approvals for both transactions and remortgaging.  The market is waiting to see if rates can finally stabilise or potentially fall in the near future, increasing confidence and the ability to finance. 

“Speculation with regard to Government assistance over Stamp Duty is welcome, with such an incentive just what the market needs to get it moving again.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, comments: “The average rate on new mortgages continued to rise, increasing by 19 basis points to 5.01 per cent. With economists believing base rate is at or near its peak, borrowers will be hoping that the worst of the pain may be over.

“While the direction of travel for new mortgage rates is generally downwards, we have seen a few lenders pull rates in the past few days, although this has been primarily in order to slow business.”

And Jeremy Leaf, north London estate agent and a former RICS residential chairman, sees it from the housing market perspective: “Although mortgage payments and inflation may be nearing, or at, their peak, neither are falling fast enough to correct the reduction in activity over the past few months.

“Like buyer enquiries and property appraisals, mortgage approvals help to understand the direction of travel for the market and determine whether prospective purchasers take the plunge. 

“The increase in effective interest rates and the shortage of stock are continuing to result in a flattening, rather than a significant reduction, in sales.”