The latest Bank of England data on money and credit, published on February 29th, revealed that while some people paid off mortgage debt in January, net borrowing through consumer credit increased.

  • Individuals repaid, on net, £1.1 billion of mortgage debt in January compared to £0.9 billion in December.
  • Net borrowing of consumer credit by individuals rose to £1.9 billion in January from £1.3 billion in December.

The news that some people were able to reduce their mortgage debt in January followed a similar move in December. Overall, the annual growth rate for net mortgage lending was negative for the first time since the series began in March 1994, at -0.2%, a new series low.

The likely explanation for the trend is that people are using savings to pay down higher mortgages that have seen rates rise sharply as existing fixed rate deals ended. Another interesting mortgage statistic from the Bank of England data is that net approvals (approvals net of cancellations) for house purchases, which is an indicator of future borrowing, rose from 51,500 in December to 55,200 in January. As we head towards Spring, when people traditionally start their house moving plans; we are beginning to see positive activity.

Perhaps of greater interest is that net consumer credit borrowing rose to £1.9 billion in January. The increase was driven primarily by higher borrowing through credit cards. However, net borrowing through other consumer credit forms, including dealer finance and personal loans, also increased.

Aligning credit news with consumer confidence data published at the end of February by GfK, we can see that the increasingly improving consumer confidence levels stalled in February. It is too early to assess the impact of the recent Spring Budget. Still, the announcement of another cut to National Insurance contributions and the promise of more help for parents receiving child benefits will hopefully ease many households' financial pressures.

The good news that came out ahead of the Budget was that optimism for people's financial situation for the next 12 months did not slip back, and zero is far better than the -18 score from February 2023.

Of particular interest to car dealers, the Major Purchase Index fell back by five points to -25, but again, this is 12 points higher than February last year.

So, what is the overall ‘take-away’ for dealers from these two pieces of insight? People are more confident in their finances than last year, and they are more open to a major purchase. We hope this helps.

Chris Rowthorn, Motor Sales Operations Director

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