UK mortgage lending weakens in May

Mortgage approvals for house purchases in the UK fell sharply in May, reflecting weaker borrowing activity across households and businesses, according to data released by the Bank of England on Monday.

The central bank said lenders approved 56,205 mortgages for house purchases during May, the lowest monthly total since December 2023.

The figure was significantly lower than April's 66,034 approvals.

The latest data also showed a broad slowdown in mortgage lending, business borrowing, and private sector credit growth during the month.

Mortgage borrowing declines

Net borrowing of mortgage debt by individuals fell to £2.9 billion in May from £4.4 billion in April.

The figure was below the previous six-month average of £5.1 billion and marked the lowest monthly borrowing level since May 2025, when net borrowing stood at £1.9 billion.

Despite the weaker monthly borrowing, the annual growth rate of net mortgage lending edged up to 3.4% in May from 3.3% in April.

Gross secured lending eased slightly to £27.1 billion from £27.4 billion a month earlier, remaining above the six-month average of £25.3 billion.

Mortgage repayments, however, increased to £22.9 billion from £22.6 billion and remained above the recent six-month average of £19.9 billion.

Mortgage approvals, regarded as an indicator of future borrowing activity, declined to 56,200 in May from 66,000 in April.

The latest reading was also below the previous six-month average of 63,300.

Approvals for remortgaging with a different lender also fell sharply, dropping to 33,300 in May from 51,200 in April.

Meanwhile, the effective interest rate on newly drawn mortgages increased to 4.22% in May from 4.08% in April.

The effective rate on the outstanding stock of mortgages remained unchanged at 3.92%.

Consumer credit remains broadly stable

Net borrowing of consumer credit remained largely unchanged at £1.7 billion in May compared with April.

The total was marginally below the previous six-month average of £1.9 billion.

Within consumer credit, borrowing through credit cards declined to £0.6 billion from £0.8 billion in April.

Borrowing through other forms of consumer credit, including personal loans and car dealership finance, increased to £1.1 billion from £0.9 billion.

The annual growth rate for total consumer credit rose to 8.9% in May from 8.7% in April.

Credit card borrowing growth accelerated to 12.1%, while other forms of consumer credit recorded annual growth of 7.5%, up slightly from 7.4%.

Interest rates across consumer borrowing showed mixed trends during the month.

The effective interest rate on overdrafts fell by 22 basis points to 21.57%, while new personal loan rates increased to 9.66% from 9.53%.

Credit card interest rates also edged higher to 21.45% from 21.20%.

Households increased deposits with banks and building societies by £5.4 billion in May, following net deposits of £5.7 billion in April.

The increase was mainly driven by additional deposits into Individual Savings Accounts (ISAs) and interest-bearing time accounts, partly offset by withdrawals from sight deposit accounts and non-interest-bearing accounts.

Business borrowing loses momentum

Business borrowing also moderated during May.

UK non-financial businesses borrowed a net £1.2 billion from banks and building societies, including overdrafts, compared with net borrowing of £5.1 billion in April.

Large non-financial businesses accounted for £1.3 billion of net borrowing during the month, down from £3.9 billion previously.

Small and medium-sized enterprises (SMEs), meanwhile, repaid a net £0.1 billion after recording net borrowing of £1.2 billion in April.

The annual growth rate of borrowing by large businesses slowed to 9.8% from 12.3%, while SME borrowing growth eased to 3.9% from 4.2%.

Private non-financial corporations (PNFCs) raised £1.1 billion in net finance during May, down sharply from £5.4 billion in April.

Within total finance raised, companies borrowed £1.8 billion through bank loans and building societies, issued £0.5 billion of commercial paper, and raised £1.0 billion through bond issuance.

These inflows were partly offset by £1.2 billion of net equity buybacks.

Money supply expands as overall lending slows

The Bank of England's broader money measure, sterling M4ex, increased by £11.0 billion in May, up from £9.2 billion in April.

The increase reflected higher money holdings by households and non-intermediate other financial corporations, while private non-financial corporations reduced their money holdings during the month.

However, sterling net lending to private sector companies and households (M4Lex) slowed sharply to £0.6 billion in May from £11.5 billion in April.

The slowdown was primarily driven by repayments from non-intermediate other financial corporations.

Household borrowing also moderated to £4.2 billion from £5.0 billion, while borrowing by private non-financial corporations declined to £2.2 billion from £4.4 billion in April.

The latest figures point to weaker borrowing activity across several segments of the UK economy during May, with mortgage approvals, business lending, and private sector credit all recording slower growth compared with the previous month.