Mortgage lending falls to lowest level since 2011, as NS&I deposits jump

interactive investor comments on the latest Bank of England Money & Credit report.

Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “The latest Bank of England statistics on mortgage lending reinforces the growing sentiment that the property market is rebounding from the chaos that ensued following the mini-Budget back in September.

“Mortgage lending fell from a net flow of £700 million in February to net zero in March, the lowest level of net borrowing since June 2011 if you strip out the pandemic years, as would-be buyers struggled to get over the affordability hurdle, with inflation running hot and mortgage rates remaining significantly higher than levels of yesteryear.

“But the housing market could prove to be more resilient than initial predictions. Net approvals for house purchases, an indicator of future borrowing, significantly rose to 52,000 in March from 44,100 in February – although this is below the monthly average for 2022 of 62,700 when mortgage rates were lower (on average).

“The upcoming crucial spring/summer buying season could give us a clear indication of the state of the property market.”

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NS&I deposits jump again

“Money poured out of savings accounts held by banks and building societies in March, while deposits into NS&I accounts jumped again - offering the clearest indication of savers’ sentiment amid the turmoil in the banking sector following the collapse of Silicon Valley Bank.

“More savers opted for the safety of NS&I savings accounts, which are backed by the government. The Financial Services Compensation Scheme covers you for up to £85,000 should a bank or building society go bust, but with the NS&I, your cash is guaranteed by the Treasury to be safe no matter how much you hold. 

“Deposits into NS&I accounts were also buoyed by a series of rate rises. This trend could continue in the coming months as the government wants its savings provider to raise even more money in the tax year - to the tune of £7.5 billion, which is 25% more than its the £6 billion target for the previous tax year. This could translate to higher savings rates from the government-sponsored savings provider.

“The uptick in the amount of savings withdrawn from banks and building societies in March could also point to the fact that many Britons have had to pull [out] savings to reinforce their budgets to withstand red-hot inflation, which remains in double digits.”

Consumer borrowing rises 

“Borrowing was slightly up in March, although the amount Britons put on the plastic was broadly unchanged from February. Those with high levels of debt should consider what they can do now to reduce their debts as the cost of credit is rising just as the prices of everyday essentials are flying. It is worth consulting a debt advice charity such as StepChange or Turn2Us and they will go through all your options.”