UK mortgage borrowing rises in August but approvals fall further

UK mortgage borrowing increased in August despite a further decline in mortgage approvals, while consumer credit borrowing accelerated, figures from the Bank of England showed on Tuesday.

Net borrowing of mortgage debt by individuals rose to £4.4 billion in August from £4.1 billion in July, but remained below the previous six-month average of £5.2 billion.

The annual growth rate of net mortgage lending was unchanged at 3.6%.

However, net mortgage approvals for house purchases, an indicator of future borrowing, fell to 54,900 in August from 55,900 in July. This was below the previous six-month average of around 60,100.

Approvals for remortgaging with a different lender declined to 34,000 from 34,600.

Gross mortgage lending fell to £23.6 billion from £25.3 billion in July, while repayments decreased to £20.4 billion from £21.1 billion.

Meanwhile, the effective interest rate paid on newly drawn mortgages increased to 4.60% in August from 4.45% in July. The rate on the outstanding stock of mortgages edged up to 4.00% from 3.97%.

Consumer borrowing picked up during the month. Net consumer credit borrowing increased to £2.5 billion in August from £2.1 billion in July, above the previous six-month average of £1.9 billion.

Credit card borrowing rose to £1.2 billion from £900 million, while other forms of consumer credit, including car finance and personal loans, increased to £1.3 billion from £1.2 billion.

The annual growth rate of consumer credit accelerated to 9.6% from 9.3%. Credit card borrowing grew 13.3% annually, accelerating from 12.6%, while growth in other forms of consumer credit edged up to 7.9% from 7.7%.

The effective rate on interest-charging credit cards increased to 21.55% from 21.45%, while the rate on new personal loans rose to 9.96% from 9.86%.

Households deposited £4.7 billion with banks and building societies during August, up from £3.8 billion in July. This included £4.4 billion deposited into individual savings accounts.

Separately, UK non-financial businesses borrowed a net £4.1 billion in bank loans during August, up from £1.9 billion in July. Large businesses borrowed £3.2 billion, while small and medium-sized businesses borrowed £900 million.

Private non-financial corporations raised a net £7.7 billion of finance during August, following virtually no net financing in July. This included £5.7 billion of borrowing through bank and building society loans and £500 million of net bond issuance.

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