ii comments on Bank of England money and credit statistics

The data reveals a fall in mortgage approvals and a reduction in cash deposit interest rates to new historical low levels.

The Bank of England has today published its latest Money and Credit report revealing a fall in mortgage approvals and a reduction in cash deposit interest rates to new historical low levels.

Key points:

• Individuals borrowed £5.3 billion of mortgage debt on net in August, following a net repayment in July of £1.8 billion. Mortgage approvals for house purchase ticked down further to 74,500 in August, from 75,100 in July.
• Consumer borrowed an additional £0.4 billion in consumer credit, on net. The effective rate on new personal loans remained below the January 2020 level at 5.87%, but was the highest since March 2020.
• Households’ net flow into deposit accounts increased in August, to £9.1 billion. Deposit interest rates fell slightly further to new historically low levels.
• Large businesses repaid £2.1 billion in loans from banks in August, whilst small and medium sized businesses repaid £1.0 billion. Private non-financial companies redeemed £1.1 billion in net finance from capital markets in August, compared to a monthly average net issuance of £2.8 billion since March 2020.

Commenting, Myron Jobson, Personal Finance Campaigner, interactive investor, says: “A fall in mortgage approvals in August was inevitable after the stamp duty holiday – which fuelled a revival in the Covid-battered property market – wind down from 1 July, with the tapering period set to end on 30 September. Demand for homes remains high, bolstered by historic low mortgage rates, but what’s lacking is the supply to match – and it is the supply of three and four-bed family homes that is most stretched. This means that the housing market is likely to slow for the remainder of the year as buyers wait for more homes to come to market.

“Just when you think they can't get any lower, saving rates have fallen further to new historical low levels. The uptick in inflation, which is forecasted to rise to 4% before the year is out, adds insult to injury, eroding the buying power of cash savings. The persistence of low savings rates provides an impetus to invest, and while the potential for greater returns from the stock market comes with inevitable risk, taking a long-term view means you can smooth out some of those highs and lows while benefiting from the long-term potential that comes with this approach.”