Net mortgage borrowing rebounds to £6.6bn in May

Net mortgage borrowing rebounded to £6.6bn in May from £3bn in April, but remained below the record £11.4bn in March, according to the Bank of England’s monthly Money and Credit statistical release.

Mortgage approvals for house purchase were 87,500 in May, up very slightly from 86,900 in April, but lower than the recent peak of 103,200 in November 2020.

For the first time since August 2020, consumers borrowed more as consumer credit than they paid off in May. Net borrowing was £0.3bn. The effective rate on new personal loans remained low at 5.61%, compared to 7.03% in January 2020.Households’ net flow in to deposit accounts fell again in May, to £7bn. Deposit interest rates fell slightly to new historically low levels.

Large businesses made net repayments of £1.9bn of loans in May, with small and medium sized businesses also making their first repayment, of £0.4bn, in over a year. Private non-financial companies raised £0.6bn of finance from capital markets in May, compared to a monthly average net issuance of £3.3bn since March 2020.

Jonathan Sealey, CEO at specialist lender Hope Capital, said: “It’s reassuring to see the market bounce back in May with mortgage borrowing at £6.6bn, compared to the low of £3bn in April. It really underlines how April was very much a hangover from March’s peak of more than £11bn.

“As we approach the stamp duty deadline with just a day to go, the property market has been at full tilt trying to get deals over the line time. This activity is reflected in the Nationwide’s house price data also out today, suggesting UK house prices rose 13.4% in the year to June - the fastest pace since 2004. However, that is only going to make it harder for first time buyers and given that home movers make up a large proportion of the transactions taking advantage of the stamp duty holiday, it’s likely borrowing is going to drop again from July.

“So, while there is still some uncertainty out there and as such people need to be aware of all the options when buying a property. This includes the specialist finance sector and the flexibility and speed of turnaround that it offers.”

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