#Baileys Bust . Money and Credit - February 2023 Bank of England Stats

3/29/2023

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Source: Sound clip: 'Rolf Harris Can You Tell What It Is Yet'

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Source: Sound clip: 'Rolf Harris Can You Tell What It Is Yet'

Published on 29 March 2023

Overview

These monthly statistics on the amount of, and interest rates on, borrowing and deposits by households and businesses are used by the Bank’s policy committees to understand economic trends and developments in the UK banking system.

Key points:

Net mortgage lending to individuals decreased from £2.0 billion to £0.7 billion in February. Looking at the period prior to the onset of Covid-19 in March 2020, this is the lowest level of net borrowing since April 2016 (also £0.7 billion).
Net mortgage approvals for house purchases increased to 43,500 in February, from 39,600 in January. This marked the first monthly increase since August 2022.
The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages increased by 36 basis points, to 4.24% in February.
Consumers borrowed an additional £1.4 billion in consumer credit in February, on net, compared with £1.7 billion borrowed during January. This was split between £0.6 billion of borrowing on credit cards and £0.8 billion of borrowing through other forms of consumer credit.
Households deposited an additional £1.6 billion with banks and building societies in February. Within this, net flow into time deposits remained strong at £6.8 billion, but this was largely offset by net withdrawals from sight deposits.
Non-financial companies (PNFCs) repaid £1.9 billion in market finance, while non-financial businesses (PNFCs and public corporations) repaid £4.5 billion of bank loans in February.
The net flow of sterling money (known as M4ex) witnessed a significant fall to -£6.9 billion in February, from £38.6 billion in January. This was primarily driven by non-intermediate other financial corporations (NIOFCs), with net flows decreasing to -£6.6 billion (from £33.0 billion in January). Net lending to the private sector (known as M4Lex) also decreased, to -£21.5 billion from -£7.3 billion over the same period.

References in the text point to the summary tables below. For further statistics, please see our visual summaries, Effective Rates (ER) statistical release, Capital Issuance statistical release, and Bankstats tables.

Lending to individuals

Mortgage lending (M&C Tables D and E):

Net borrowing of mortgage debt by individuals decreased from £2.0 billion in January to £0.7 billion in February, the lowest level since July 2021 (£1.8 billion of net repayment). If the period since the onset of the Covid-19 pandemic is excluded, net borrowing of mortgage debt was at the lowest level since April 2016 (also £0.7 billion). Gross lending decreased from £22.9 billion in January to £20.8 billion in February, while gross repayments fell slightly from £21.4 billion to £20.1 billion. Net approvals (that is, net of cancellations) for house purchases, an indicator of future borrowing, increased to 43,500 in February, from 39,600 in January (Chart 1). This was the first monthly increase in approvals for house purchases since August 2022. Approvals for remortgaging (which only capture remortgaging with a different lender) also rose to 28,100 in February from 25,400 in January.

Seasonally adjusted

The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages increased by 36 basis points, from 3.88% to 4.24% in February. The rate on the outstanding stock of mortgages rose by 10 basis points, to 2.64%.

United Kingdom Mortgage Lending

Home Loans in the United Kingdom decreased to 740 GBP Million in February from 2540 GBP Million in January of 2023. source: Bank of England

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Executive Summary

Towards the end of last year mortgage and interest rates increased and we are starting to see the impacts of those changes within these statistics. Seasonally adjusted residential property transactions appear depressed, indicating a slowing of the housing market.

About this release

These HM Revenue and Customs (HMRC) National Statistics provide monthly provisional estimates of residential and non-residential property transactions in the UK and its constituent countries. These statistics are based upon records by HMRC, Revenue Scotland and the Welsh Revenue Authority (WRA) for Stamp Duty Land Tax (SDLT), Land and Buildings Transaction Tax (LBTT) and Land Transaction Tax (LTT) respectively. The latest release was published 09:30am 21 March 2023 and was updated with provisional data from completed transactions during February 2023. The next release will be published 09:30am 21 April 2023 and will be updated with provisional data from completed transactions during March 2023. The ‘Monthly property transactions completed in the UK with value of £40,000 or above’ statistical release is Crown Copyright. The information can be used as long as the source is clearly described. The data within these HM Revenue and Customs (HMRC) statistics does not necessarily reflect the current strength of the housing market, because they represent completions which are on average two to four months after an initial offer is made on a property.

Coronavirus (COVID-19)

On 23 March 2020 the UK government announced a UK wide lockdown, including restrictions for the property market. These restrictions were then gradually removed during the summer of 2020. Following this first lockdown, the UK government introduced several more regional and national lockdowns in England, the last of which ended on 19 July 2021. The housing market in England remained active during all but the first lockdown. The levels of current monthly property transactions are similar to, but slightly lower than, those in early 2020, before the coronavirus (COVID-19) pandemic. The number of residential property transactions in the year to date are significantly lower than those in early 2022. The pattern of transactions around this time was heavily affected by the pandemic and temporary reductions in stamp duty.

The latest statistics

The latest statistics section provides information on UK residential and non-residential transactions during the previous 3 years. To demonstrate any underlying trends within the data, seasonally adjusted transactions estimates are provided alongside non-seasonally adjusted estimates. Caution is advised when interpreting estimates for the latest month due to their provisional status. This is because they are based upon incomplete data as not all SDLT, LBTT and LTT returns are received by HMRC, Revenue Scotland and WRA when figures are compiled. We therefore expect statistics to be revised in future months, although transactions figures generally settle after approximately 3 months.

Figure 1: Non-seasonally adjusted and seasonally adjusted UK residential property transactions by month between February 2020 and February 2023.

Figure 1 demonstrates the following trends for UK residential transactions:

UK residential transactions have generally been stable in recent months, but we are now starting to see a decline in the numbers of transactions.
Residential transactions are marginally lower than pre-coronavirus, for example the provisional non-seasonally adjusted estimate in February 2023 is 76,920 compared to 82,830 in February 2020.
During the spring of 2020 there were substantial decreases in property transactions due to the coronavirus pandemic. UK residential transactions gradually increased in subsequent months, alongside large peaks in March, June, and September 2021 caused by temporarily increased nil rate bands of SDLT, LBTT, and LTT

Figure 2: Non-seasonally adjusted and seasonally adjusted UK non-residential property transactions by month between February 2020 and February 2023.

Figure 2 demonstrates the following trends for UK non-residential transactions:

Non-residential transaction figures appear to be rising, with non-seasonally adjusted transactions for February at 8,710, compared to January’s 8040. The seasonally adjusted figures support this, indicating a rise in UK non-residential transactions between January and February 2023.
During April and May 2020 there were significant decreases in property transactions due to the coronavirus. Following this, non-residential transactions increased for several months, before stabilising.