Net borrowing of mortgage debt by individuals climbed to £5.9bn in January, up from £4bn in December.

Figures published by the Bank of England (BoE) confirmed that this is above the pre-pandemic average of £4.3bn in the 12 months up to February 2020, and the highest monthly total since the £9.4bn in September last year.

Gross lending also increased to £23.8bn in January, from £22bn in the previous month, while gross repayments also rose slightly to £18.3bn, up from £18bn in December.

The BoE also confirmed that approvals for house purchases, which are an indicator of future borrowing, jumped to 74,000 in January. This figure was above the 12-month average up to February 2020 of 66,700 and also the highest since July last year, when approvals hit 75,900.

Furthermore, approvals for remortgaging, which just capture remortgaging with a different lender, also saw a rise to 46,200 in January. This figure remained below to the 12-month average up to February 2020 of 49,500, but was the highest monthly figure since February 2020, when they hit 52,300.

Commenting, TMA Club development director, Lisa Martin, said the figures mark a “strong start to the year”.

“We saw many lenders raising their rates last week, in some cases by as much as 0.6%, and when this is coupled with rising living costs and the upcoming increase in National Insurance contributions, borrowers are going to be looking for the best mortgage options available to them to keep their repayments at an affordable level,” Martin said.
 
“There have been increases in approvals for both house purchases and remortgage activity, a trend we have been hearing from brokers and lenders, which could indicate that February and March gross lending may also see an increase. As demand increases brokers will need to provide their customers with suitable and affordable products that meet their needs.”

Coreco managing director, Andrew Montlake, added: “Interest rates are rising to contain spiralling inflation, tax hikes are on the way, energy bills are increasing and food prices are also accelerating at a rate of knots. Moving forward, it's likely that people's borrowing power will wane as lenders take into account these extra costs.

“However, we are still in an extremely low interest rate environment with competition among lenders fierce and this will continue to drive a certain level of transactions.”

The BoE also published consumer credit figures and revealed that January saw individuals borrow £600m in consumer credit on net during the month, which was lower than the average of £1bn in the 12 months up to February 2020.

January’s total was split between £100m of additional borrowing on credit cards, and £500m in borrowing in other forms of consumer credit, such as personal loans and car dealership finance.

The annual growth rate for all consumer credit increased to 3.2% in January, up from 1.5% in December, while the BoE’s data also showed the annual growth rates of credit cards and other forms of consumer credit were 6.2% and 2.0% respectively.

Freedom Finance chief marketing officer, David Hendry, said that the consumer credit figures show that fears around the impact of the Omicron variant and inflation still weighed on consumers’ borrowing habits at the start of the year.

“Households deposited an extra £7.7bn with banks and building societies and while flows are clearly trending down towards pre-pandemic levels as spending habits normalise, this represents a noticeable uptick from the past few months,” Hendry added.

“It will be important to watch how these figures develop over the coming year as inflation starts to hit British households while the energy price cap increases in April at the same time as planned tax rises come into force. The slight uptick in deposits may indicate that households are starting to create a cash buffer in advance of trickier times ahead for their personal finances.”

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