Net borrowing in August was £1.4bn below the 12 month average to June 2021, when the full stamp duty holiday was in effect.
Gross lending bounced back to £21.5bn in August, from £16.6bn in July. Gross repayments fell a little to £17.6bn.
The data also shows that mortgage approvals for house purchase dropped down to 74,500 in August, from 75,100 in July.
Approvals for remortgaging – which only captures remortgaging with a different lender – rose to 39,700 in August.
This was low compared to the months running up to February 2020, but is the highest since March 2020.
Consumers borrowed an additional £400m in consumer credit, on net and the effective rate on new personal loans remained below the January 2020 level at 5.87%, but was the highest since March 2020.
Households’ net flow in to deposit accounts increased in August to £9.1bn, while deposit interest rates fell slightly, to new historically low levels.
This compares to an average net flow into banks and building societies of £8.5bn between April and July 2021, and a series peak of £27.5bn in May 2020.
The August flow is relatively strong as compared to pre-pandemic; in the year to February 2020, the average inflow was £4.7bn.
Large businesses repaid £2.1bn in loans from banks in August, whilst small and medium sized businesses repaid £1bn.
Private non-financial companies redeemed £1.1bn in net finance from capital markets in August, compared to a monthly average net issuance of £2.8bn since March 2020.
Jonathan Stinton, head of intermediary relationships at Coventry Building Society, said: “The end of the first threshold for the stamp duty holiday and the usual summer holiday lull have led to a further dip in activity in August.
“Despite this, approvals for house purchases remained above pre-pandemic levels, showing the underlying strength of the market.
“With the end to the final part of the stamp duty holiday coming up tomorrow, we’d expect to see an increase in activity in September but it’s unlikely to be the same surge that we saw in June.
“And the upcoming Autumn Budget could be a good time for a change in the stamp duty thresholds, to ease the financial burden for the average homebuyer.
“Despite the dip in activity, there are still plenty of opportunities for brokers.
“With a particularly high number of maturities expected over the coming months, brokers can really add value for their clients by helping them to take advantage of the range of low rates and attractive deals available.”
Nitesh Patel, strategic economist at Yorkshire Building Society, added: “The amount people collectively borrowed to buy houses grew by £5.6bn in August, after falling in July, but still remains higher than pre-pandemic levels. This is net borrowing after taking into account mortgage repayments.
“A more accurate measure of market conditions and activity is the volume of mortgage approvals – this figure edged down to 74,500 in August compared with 75,100 in July, the bank holiday weekend at the end of the month may have played part.
“That said approvals are still way ahead compared to the year before the pandemic started.
“The stamp duty relief that was introduced in July last year has played a large part in driving exceptional market conditions for over a year.
“That said, low borrowing costs and people re-evaluating their housing needs through the pandemic have also helped the market thrive.
“Household balance sheets are also continuing to improve with excess savings – the level of savings above what households normally save – reaching £160bn since March last year.
“Whilst on an annual basis consumer credit was 2.4% lower than a year ago, should support the housing market over the medium term as a result of greater financial confidence.
“However, it is important to note that not everyone has been so lucky. Many low-income households have struggled to make ends meet during the pandemic either due to losing their jobs or reduced earnings.
“This combined with pressures from rising inflation and upcoming tax increases will add further stresses to their already low level of financial resilience.”
John Phillips, national operations director at Just Mortgages, said: “Following on from the rare net repayment in July, mortgage borrowing returned to closer to normal in August as the stamp duty holiday begins to wind down.
“With just a few hours left in before stamp duty returns fully, from now we will begin to get a clearer picture of the state of the housing market in the UK. And the outlook is bright.
“Despite a slight reduction in activity from the huge peaks earlier in the year, there is still plenty of people looking to move.
“The market is still characterised by an imbalance between buyers and sellers, with the former considerably out-weighing the latter, and this dynamic is unlikely to shift anytime soon.
“It will be interesting to see in the next Budget whether there will be new policies announced to drive up the number of properties being built, as the current figure is way below the needed 300,000 per year.”
Karen Noye, mortgage expert at Quilter, added: “It’s clear that we are starting to see a slowdown in the market. The latest Money and Credit statistics show that soon after the stamp duty holiday was tapered the amount of mortgage debt taken on by individuals has reduced dramatically to £5.3bn.
“To put this into perspective in June, which was the last month of the full stamp duty holiday, net borrowing was a record £17.7 bn.
“Mortgage approvals for house purchase have also dropped to 74,500 in August and continues a downward trend that we have seen from the spring.
“However, while clearly the housing market is starting to flag after the removal of some of the government schemes such as the stamp duty holiday, it has not crashed as some predicted.
“Clearly these measures have inflated house prices and caused a flurry of activity in the market, but the number of mortgage approvals still remains higher than pre-pandemic levels showing that there could be larger structural changes to the market in play.
“Just yesterday ONS figures showed that house prices in rural and coastal regions had increased at higher levels than the rest of the country illustrating that people’s taste in housing may have been fundamentally altered by the pandemic.
“Prospective buyers are now looking for more than just proximity to their workplaces and are happy to live further out to appreciate more space and access to the countryside or seaside.
“At present, most statistics points to the housing market deflating at a measured pace opposed to a significant drop but if the virus comes back this winter with a vengeance coupled with sky high living costs due to gas shortages all bets may be off.
“The next few months may be turbulent and could heavily impact what happens as we approach the end of 2021.”
