The Bank of England’s latest Money and Credit statistics release paints a nuanced picture of the UK’s financial undercurrents as household credit dynamics shift under the weight of elevated borrowing costs and macro uncertainty. In August, gross mortgage lending dipped to £22.7 billion as repayments climbed to £20 billion — a clear sign that refinancing pressures are mounting.
Ian Futcher, financial planner at Quilter, comments:
“The Bank of England’s latest Money and Credit figures highlight the continued pressures on the housing market. The residual effects of stamp duty changes, combined with ongoing affordability issues and the typical summer slowdown, are still dampening activity.
Mortgage borrowing saw a sharp decline following the changes to stamp duty earlier this year, and it has been struggling since. Today’s figures show this trend has continued, as net borrowing of mortgage debt fell by £0.2 billion in August to £4.3 billion, following a £0.9 billion decrease to £4.5 billion in July. Approvals for house purchases – a key forward-looking measure – fell by 500 in August to 64,700, while remortgaging activity also continued to decline, with approvals dropping by 900 to 37,900.
Although a summer slowdown is typical, when combined with the other ongoing market pressures, including budget rumours, it could have wider implications for house prices. We are already seeing a dip in demand for homes over £500,000, for example. However, as we move further into the autumn and winter, the market will have had time to adjust to the stamp duty changes and more prospective buyers will have built up their savings enough to cover the higher tax bills, so we could see a gradual return of momentum.
Consumer credit borrowing held steady at £1.7 billion in July, reflecting a slight decrease in credit card borrowing and a small uptick in other form of consumer credit reliance. While it is positive that borrowing has not risen overall, interest rates are still elevated and the Bank of England’s base rate looks unlikely to fall further for a while yet, so this ongoing reliance on borrowing could be a cause for concern in terms of longer-term financial resilience.
Elsewhere, today’s figures show households are continuing to top up their savings, but not quite at the rate they have been in recent months. Deposits with banks and building societies increased by £5.4 billion in August, down from £7.1 billion in July. This includes £2.3 billion into ISAs, an additional £2.6 billion being deposited into interest-bearing accounts and £0.7 billion into non-interest-bearing accounts.
Higher costs during the summer months for things such as holidays and children’s clubs during the school break will have had an impact on how much could be set aside, but it is encouraging to see that many people have still been able to top up their savings. As the budget nears, households will be alert to any potential tax or personal finance changes, and we could see more looking to pre-emptively boost their savings in the lead up.”
Richard Pinch, Senior Risk Director, at leading independent financial services consultancy Broadstone, commented:
“Mortgage borrowing decreased again in August reflecting the continued economic uncertainty lingering over the UK in spite of the most recent rate cut from the Bank of England.
Inflation concerns remain persistent and with another tax-raising Budget looking inevitable at the end of November, household budgets remain squeezed.
Until there is more certainty in the market or a significant improvement in borrowing conditions, mortgage volumes are likely to remain depressed as we head into 2026.”
