The key chart
Trends in cumulative HH and NFC financing flows (12-months, £bn) (Source: BoE; CMMP)
The key message
UK corporates and house buyers are reading the BoE’s script, even if consumers are not.
Cumulative 12-month financing flows to the household (HH) and corporate (NFC) sectors slowed to £8.3bn in November 2023, down from £65.2bn a year earlier (see key chart above).
- Cumulative 12-month financing flows to the NFC sector have been consistently negative since January 2023
- In November 2023, they were -£3.2bn compared with £3.2bn a year earlier i.e. corporates repaid debt throughout 2023
- Note that the average cost of new NFC borrowing has risen by 495bp to 7.0% since the BoE began policy tightening (see chart below).
Trends in the average cost of new mortgages and NFC loans (%) (Source: BoE; CMMP)
- Cumulative 12-month finance flows to the HH sector fell to £11.5bn in November, down from £61.3bn a year earlier
- Lending for house purchases (mortgages) was net zero in November
- The YoY growth rate for net mortgage lending was 0.3%, the lowest growth rate since the BoE’s monthly data series began back in March 1994
- Note that the average cost of new mortgages has risen 384bp to 5.34% since the start of policy tightening (see chart above).
So what?
Financing flows to the UK private sector are falling sharply and reaching potential choke points for growth and much needed investment.
Beyond the headlines, there is a sharp contrast in terms of the dynamics of borrowing for consumption (resilient), investment (weak), and house purchases (slowing sharply).
While the message from the UK money sector remains relatively positive for on-going consumer demand, it is far more concerning with respect to investment and real estate.
Please note that the summary comments and charts above are abstracts from more detailed analysis that is available separately.