The Bank of England said that consumer lending increased by 1.295 billion pounds in August after rising by 1.231 billion pounds in July (revised from 1.215 billion pounds). Economists had expected an increase by 1.07 billion pounds. This was driven by higher net borrowing through other forms of consumer credit (such as car dealership finance and personal loans), which rose from 0.7 billion pounds in July to 0.8 billion pounds in August, while net borrowing through credit cards was little changed at 0.5 billion pounds in August. The annual growth rate for all consumer credit was 7.6% compared to 7.8% in July.
Meanwhile, the net mortgage approvals rose from 62,500 in July to 64,900 in August, the highest level since August 2022. Economists had expected growth to 63,800. Approvals for remortgaging (which only capture remortgaging with a different lender) rose from 25,200 in July to 27,200 in August. The ‘effective’ interest rate on newly drawn mortgages was 4.84% in August, up from 4.81% in July. The rate on the outstanding stock of mortgages also rose by 3 basis points, to 3.72%.
The report also showed that UK non-financial businesses borrowed, on net, 1.7 billion pounds of bank and building society loans (including overdrafts), compared to 0.3 billion pounds in July. Within this measure, net borrowing by large non-financial businesses rose to 2.3 billion pounds in August, from 0.7 billion pounds in July. Net repayments by small and medium-sized non-financial businesses (SMEs) amounted to 0.6 billion pounds in August, up from 0.4 billion pounds in July.