1 May 2025
If you are covering the latest Bank of England money and credit statistics, please see the following comment from Rosie Hooper, chartered financial planner at Quilter Cheviot:
“The latest money and credit statistics from the Bank of England show the changes to stamp duty, which came into effect at the start of April, resulted in a surge in mortgage borrowing as buyers pushed to get property purchases across the line.
“Given March was the final month of the lower stamp duty rates, it comes as little surprise that net borrowing of mortgage debt climbed dramatically by £9.7 billion to £13.0 billion in March. This follows what had been a decrease of £1.0 billion to £3.3 billion in February. Gross lending also increased markedly to £39.9 billion in March, rising from £24.9 billion in February.
“While the stamp duty changes certainly spurred on prospective first time buyers and home movers, net mortgage approvals for house purchases, which is indicative of future borrowing, fell for the third consecutive month. This figure dropped by 800 to 64,300 in March, and given those looking to purchase a new home will have to contend with a significantly higher tax bill going forward, we can expect this decline to continue at pace for some time yet.
“Similarly, the spike in borrowing is expected to be anomalous, and we are likely to see an equally sharp slowdown in the coming months. Prospective buyers who were unable to get a sale across the line before the end of March may well either reconsider their plans to move entirely or will need to continue building their savings pot to cover the higher tax bill. This will be particularly burdensome for first time buyers, especially if they are looking to buy a home in a higher value area. For example, a first-time buyer purchasing a £500,000 property will now need to cough up £10,000 to cover their stamp duty bill, compared with £3,750 under the previous rules. This rule change has added a considerable affordability hurdle at a time when many buyers, particularly those looking to take their first step onto the ladder, are already stretched.
“Elsewhere, consumer credit decreased slightly to £0.9 billion from £1.3 billion in the prior month. Credit card borrowing saw a particular slowdown, dropping to £0.2 billion in March, the lowest level since April 2024. With the warmer months now upon us, it seems less households are reliant on debt to cover essential spending as we had seen through the winter period. Given the backdrop of persistently higher interest rates, this drop in credit card borrowing is a encouraging.
“On a similarly positive note, bank and building society deposits grew by £7.4 billion in March, up considerably compared to February. This was driven by households depositing £4.2 billion into ISAs, likely as people rushed to make use of their ISA allowances before the end of the tax year. Interestingly, £1.3 billion was withdrawn from interest-bearing accounts, possibly due to interest rates beginning to look less attractive.
"A decreased reliance on credit is a positive, and so too is the increase in household deposits. It seems more people are now finding themselves with a little more cash to spare, but it may well be a case of people squirrelling as much as possible away now given inflation is expected to pick back up later in the year.
“Today’s figures show that while the housing market picked up dramatically in March, we are likely to see a significant drop off in the coming months due to the stamp duty changes. Borrowers already face affordability pressures, and many will now need to find several thousand pounds more to pay their stamp duty bills. For the market to start to gather pace again we will need to see mortgage rates decline significantly, which in turn would entice more people to market. Unless this happens, 2025 might be relatively stagnant year for house prices."
