Net mortgage borrowing in the UK rises in January
UK mortgage approvals for house purchases rose to 74,000 in January, above the 12-month pre-pandemic average up to February 2020 of 66,700, Bank of England’s (BoE) new data has revealed.
According to the BoE’s figures released on Tuesday, net borrowing of mortgage debt by individuals amounted to £5.9 billion. Consumers borrowed an additional £0.6 billion in consumer credit, on net while the effective rate on new personal loans fell by 6 basis points, to 6.21% in January.
The surge came amid a buoyant housing market fuelled by the ongoing demand-supply mismatch for property, and despite Omicron clouding the economic outlook. Rightmove in the meanwhile says that the average asking price increased by 2.3% — or £7,785 — in February to a record £348,804.
Lending to individuals
Net borrowing of mortgage debt by individuals increased to £5.9 billion in January, from £4.0 billion in December. This is above the pre-pandemic average of £4.3 billion in the 12 months up to February 2020, and the highest since September 2021 (£9.4 billion).
Source: Bank of England. Seasonally adjusted flows of Mortgage lending in the United Kingdom.
The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages was unchanged at 1.58% in January. The rate on the outstanding stock of mortgages was broadly unchanged from a series low in December, ticking up 1 basis point to 2.01% in January.
Gross lending rose to £23.8 billion in January, from £22.0 billion in December. Gross repayments also rose slightly to £18.3 billion in January from £18.0 billion in December. Approvals for house purchases, an indicator of future borrowing, rose to 74,000 in January, above the 12-month average up to February 2020 of 66,700 and the highest since July 2021 (75,900).
Approvals for remortgaging (which only capture remortgaging with a different lender) also rose, to 46,200 in January. This remains below to the 12-month average up to February 2020 of 49,500, but is the highest since February 2020 (52,300).
Experts have also highlighted that Brits are looking to move house before interest rates go up further. Simon Gammon, managing partner at Knight Frank Finance, said “We’re now seeing large numbers seeking to move before rates rise further. The limiting factor on purchasing activity during the weeks ahead will be the shortage of properties to purchase.
Households’ deposits
Households deposited an additional £7.7 billion with banks and building societies in January. In addition, households deposited £0.1 billion into National Savings and Investment (NS&I) accounts in January, which are not captured within household deposits with banks and building societies but can act as a substitute for them.
Source: Bank of England. Seasonally adjusted net flow of Household’s deposits.
The combined net flow into both deposits and NS&I accounts in December (£7.8 billion) compares to an average monthly net flow of £9.4 billion in the twelve months to December 2021 (Chart 3). However, the combined January net flow was higher than pre-pandemic flows; in the year to February 2020, the average net flow was £5.5 billion.
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