Quilter : BoE stats show mortgage lending plummets and reliance on consumer credit dips

If you are covering the latest Bank of England Money and Credit statistics, please see the following comment from Karen Noye, mortgage expert at Quilter:

"The latest Money and Credit statistics from the Bank of England show the housing market is now in the midst of a significant slowdown. This morning's data show that mortgage approvals for house purchases dropped to 35,600 in December, down from 46,200 in November and the lowest level since May 2020.

"Over the past few months, we have witnessed a sizeable fall in the level of demand in the market. While mortgage rates have dipped somewhat since the highs seen towards the end of last year, monthly costs remain far higher than many people had become accustomed to in recent years. When coupled with rising energy bills - particularly now the winter has truly set in and people are becoming more reliant on their heating - we may be entering a time where more people begin to consider putting their properties up for sale in favour of a cheaper home. House prices have started to fall in recent months, and should the level of demand continue to decrease at the same time more people put their homes on the market, we will likely see this trend continue and a switch from the seller's market to a buyer's market could materialise.

"The Bank of England base rate currently sits at 3.5% and is widely expected to increase to 4% at Thursday's Monetary Policy Committee meeting. Further rate rises have already largely been priced in when it comes to mortgage rates, but a further base rate rise will likely mean a fall in mortgage rates will be a while off yet and could see buying a first home or moving home pushed out of reach for many.

"Outside of the housing market, the cost-of-living crisis has been taking a real toll and borrowing has been serving as a crutch for those struggling financially in recent months. This morning's data, however, show individuals borrowed an additional £0.5 billion in consumer credit in December on net, down from £1.5 billion in November. This was lower than the previous six-month average of £1.2 billion.

"While the dip in consumer credit is a positive given rising interest rates, should borrowing rise in the coming months and more people start to rely on credit cards to help make ends meet, it could spell for disaster. The effective rate on interest bearing credit cards rose to 19.55% in December, up from 19.24% in November, meaning borrowers could rapidly find themselves spiralling into debt if they are unable to pay it off."