UK mortgage borrowing slows as home purchase approvals fall - BoE

UK mortgage borrowing slowed sharply in May, while approvals for home purchases fell to their lowest level in almost a year and a half, according to figures published by the Bank of England on Monday.

Net borrowing of mortgage debt by individuals fell to £2.9 billion in May from £4.4 billion in April. This was below the previous six-month average of £5.1 billion and marked the weakest monthly borrowing since May 2025, when net lending totalled £1.9 billion.

Net mortgage approvals for house purchases, a leading indicator of future borrowing, fell to 56,200 in May from 66,000 in April, below the FXStreet consensus forecast of 63,000.

The figure was also below the previous six-month average of 63,300 and marked the lowest level since December 2023.

Approvals for remortgaging with a different lender also fell sharply to 33,300 from 51,200.

The effective interest rate on newly drawn mortgages rose to 4.22% in May from 4.08% in April, while the rate on the outstanding stock of mortgages was unchanged at 3.92%.

Consumer credit borrowing remained broadly stable at £1.7 billion in May, unchanged from April and slightly below the previous six-month average of £1.9 billion.

Within this, net credit card borrowing eased to £600 million from £800 million, while borrowing through other forms of consumer credit, including personal loans and car finance, increased to £1.1 billion from £900 million.

The annual growth rate of consumer credit accelerated to 8.9% in May from 8.7% in April, with credit card borrowing growth rising to 12.1% from 11.8%.

Households continued to increase their savings, depositing a net £5.4 billion with banks and building societies during May, following £5.7 billion in April. The increase was driven mainly by inflows into individual savings accounts and time deposits.

Business borrowing also moderated during the month.

Private non-financial corporations borrowed a net £1.1 billion of finance in May, down from £5.4 billion in April. Bank loans accounted for £1.8 billion of borrowing, compared with £4.3 billion the previous month, while net bond issuance totalled £1.0 billion and commercial paper issuance £500 million. These were partly offset by £1.2 billion of equity buybacks.

Overall lending by banks and building societies to UK non-financial businesses totalled £1.2 billion, down from £5.1 billion in April. Large businesses borrowed £1.3 billion, while small and medium-sized businesses repaid a net £100 million.

Separately, the Bank of England said the flow of sterling broad money, measured by M4ex, increased to £11.0 billion in May from £9.2 billion in April, driven by higher holdings among households and non-intermediate other financial corporations.

However, sterling lending to the private sector, measured by M4Lex, slowed sharply to £600 million from £11.5 billion in April, largely reflecting repayments by financial corporations. The annual growth rate of M4Lex eased to 5.9% from 6.4%.

At its latest policy meeting on June 18, the Bank of England left Bank Rate unchanged at 3.75% in a 7-2 vote. Chief Economist Huw Pill and external Monetary Policy Committee member Megan Greene voted for a 25 basis point increase, while the remaining seven members backed no change.

The central bank has kept rates unchanged at all four meetings this year, following a quarter-point cut to 3.75% in December. The next policy decision is due on July 30.

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