Net borrowing of mortgage debt by individuals dropped by 44% between June and July, standing at £4.3bn last month, HMRC has revealed.

The latest Money and Credit Report found that the latest data fell below the previous six-month average of £5.3bn.

Net mortgage approvals for house purchases dropped to 56,100 in July, below the 60,800 average recorded in the last six months, while approvals for remortgaging increased from 34,100 to 34,500.

HMRC also revealed that the annual growth rate for net mortgage lending remained unchanged at 3.6% in July.

President at OnTheMarket, Jason Tebb, said the latest mortgage data demonstrates the effect of ongoing political and economic uncertainty on buyer and seller decision-making.

He added: "With the effective interest rate on newly drawn mortgages increasing to 4.45% in July from 4.35% in June, the impact of higher borrowing costs is also making itself felt. The Bank of England’s decision to hold base rate steady at recent meetings will help steady concerns if this approach continues into the Autumn."

Across this period, households deposited £2.2bn in cash ISAs, with £3.5bn being withdrawn from easy-access accounts paying interest during the month.

Furthermore, consumer credit net borrowing by individuals reached £2bn, increasing from £1.9bn.

Net borrowing from credit cards stood at £900m, down from £1bn in June. Net borrowing through other forms of consumer credit, such as car dealership finance or personal loans increased from £900m to £1bn month-on-month.

Head of personal finance at AJ Bell, Sarah Coles, stated that the latest savings data is "hardly surprising" as the holidays are always more of a time for spending than for saving.

She added: "Cash ISAs bucked the withdrawal trend. The £2.2bn paid into these accounts wasn’t a particularly notable sum, and is significantly below the amount paid in during July for the previous two years. However, this isn’t the end of the dash for cash ISAs. Savers and investors tend to be highly motivated by a deadline, and from April 2027 savers under 65 will see their annual cash ISA allowance reduced from £20,000 to £12,000. That means we can expect cash ISA enthusiasm to build again as the summer fades and the end of the tax year gets closer."

Head of regulatory practice at Broadstone, Damien Burke, concluded: "The financial markets backdrop remains challenging with UK borrowing costs rising to post financial crisis highs this morning and expectations of further interest rate hikes growing. If these pressures persist, they could feed through into higher mortgage pricing and further weaken activity across the housing market.

"Meanwhile, consumer credit borrowing remains elevated and while this partly reflects resilient demand, it may indicate that some households are increasingly reliant on borrowing as living costs continue to stretch their finances."

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