Property market surge pushes mortgage lending to record high
Covid-19 and the measures to combat its spread have twisted Britain's economy dramatically this year.
Lockdowns made property purchasing next to impossible in the spring, while supercharging demand for moving.
Some shops closed for months, storing up demand as customers itched to get new products. Others have struggled, as online sales have replaced some physical shopping.
Lending data from the Bank of England shows how much the nation's financial habits changed. These charts show where we are spending big, and where we are more cautious.
Mortgage boom
Lockdown stopped the housing market dead for several months. Potential buyers were blocked from viewing homes, surveyors struggled to visit properties for valuations, and banks were adjusting to staff working from home en masse.
Add to that people who decided they wanted to move home after months of working from kitchen tables, and all of the ingredients were in place for a housing market bonanza. August delivered that in spades.
Banks and building societies approved almost 85,000 loans for home purchase in the month, the highest number since late 2007.
That amounts to £18.1bn of mortgages - the highest in a single month on record, as house prices are higher than they were back before the financial crisis.
It is not yet enough to make up for sales lost to the pandemic, however. Between January and August almost 418,000 loans were approved, compared with 524,000 in the same period of 2019.
Those loans are getting cheaper, although banks have been cutting availability for borrowers with a small deposit.
At the start of the year a mortgage with a five-year fix typically came with an interest rate of 1.97pc. Now it is down to 1.79pc. Similarly a two-year fixed rate is down from 1.79pc to 1.68pc.
Credit cards are gathering dust
There was also potential for pent up demand for consumer credit, since families had been stuck indoors unable to spend for months.
Generally still in work, or at least paid via furlough, but with greatly reduced expenditure, households paid down about £17bn of credit card debt.
When shops, restaurants and holidays were back on the agenda, they borrowed more than £1bn on credit in July, including £600m on cards, getting back to more traditional spending habits.
Yet this was not the beginning of a wave of spending, if August’s numbers are anything to go by.
Retail sales might be back above pre-Covid levels, but overall spending on credit is not. Consumer credit fell back to a mere £300m in the month, including £243m on credit cards.
It suggests a degree of caution on the part of families, who may be keen to keep their debts down at a time of economic uncertainty.
Topping up the savings
This is reinforced by households’ continued saving. Families put another £5.2bn away in August - down on the record highs of the lockdown months, but still above the £4.6bn monthly average of 2019.
It hints at a sustained willingness to build financial resilience, instead of spending freely the moment shoppers were off the lockdown leash.
Business borrowing
The urgent demand of full lockdown sent borrowing spiralling. Small and medium-sized businesses that typically borrowed very little month to month ended up taking loans totalling almost £18bn in May. With costs stubbornly high but revenues trashed, government-backed loans helped them stay afloat.
By August this was down to £2.2bn - still well above the net £1.5bn borrowed for the whole of last year.
Bigger businesses had their rush to borrow from banks in March, repaid some debts in the subsequent months, and returned to a more normal rate of just over £2bn in August.
