Money growth holds at 4.4% as mortgage demand slides and credit cards take the strain
Broad money growth ticked up to 4.4% in August, about as unremarkable a monetary number as you could ask for and comfortably inside GBTT’s indicative range. The more telling figures sit underneath it.
House-purchase approvals have fallen to their lowest since December 2023, while households are putting more on credit cards that now charge them over 21%.
Key Points
- Money growth is steady at 4.4%. Annual M4ex growth rose a tenth of a point from July’s 4.3% and has now sat inside GBTT’s indicative 4–4.5% range for two months running.
- The monthly swing came mostly from financial firms. M4ex rose £16.2bn after a revised £9.8bn fall in July, and £11.1bn of August’s increase came from NIOFCs, the pension funds, insurers and other financial companies that sit outside the banking system.
- Fewer buyers are lining up mortgages. Approvals for house purchase fell to 54,900 from 55,900, the lowest since December 2023 and well short of the six-month average of about 60,100.
- Those who do borrow are paying more. The effective rate on newly drawn mortgages rose to 4.60%, up 25 basis points in two months.
- Card borrowing is picking up speed. Households took on £2.5bn of consumer credit against a six-month average of £1.9bn. Annual growth reached 9.6%, and credit-card debt is 13.3% higher than a year ago at an effective rate of 21.55%.
- Businesses came back to the banks. PNFCs raised £7.7bn of net finance after next to nothing in July, £5.7bn of it through bank loans.
- Lending is still growing faster than money. M4Lex growth slipped to 6.1% from 6.4%, still well clear of M4ex at 4.4%.
Look only at the headline and you would conclude that not much happened in August. M4ex growth of 4.4% is close to where GBTT would want it, and after June’s jump to 4.9% and July’s drop back to 4.3%, broad money seems to have settled at a pace consistent with moderate growth in nominal demand. On this measure, there is no monetary overhang building.
The monthly figures remain jumpy. M4ex rose £16.2bn in August having fallen £9.8bn in July, and most of the swing came from NIOFCs, whose money holdings went up by £11.1bn. Those moves usually say more about how financial firms are managing their portfolios and liquidity than about the real economy, which is why the annual rate is the better guide.
Households added £4.7bn to their bank deposits over the month. ISAs alone took in £4.4bn, while £1.6bn came out of interest-bearing sight accounts.
The real story is in credit, where households are heading in two directions at once.
Fewer mortgages in the pipeline
Approvals for house purchase fell to 54,900 in August, the fourth month out of the last five below 60,000 and the weakest figure since December 2023. A year earlier, the Bank’s database puts August 2025 at 65,364.
Approvals feed through into lending with a lag, so this is the number to watch into the autumn. Actual borrowing has held up so far. Net mortgage lending rose to £4.4bn from a revised £4.1bn, although that is still short of the £5.2bn six-month average, and gross lending dropped to £23.6bn from £25.3bn.
Cost is part of the picture. The effective rate on newly drawn mortgages has gone from 4.35% in June to 4.45% in July and 4.60% in August. That series tracks loans as they complete, so it runs behind the rates on lenders’ websites, but the direction is plain enough. Even the average rate across all outstanding mortgages edged up, to 4.00% from 3.97%, as older fixed-rate deals roll off.
Remortgaging approvals dipped to 34,000 from 34,600, and annual growth in mortgage lending held at 3.6%.
Consumer credit is the uncomfortable number
Consumer credit is moving the other way. Households took on a net £2.5bn in August, up from £2.1bn in July and clearly above the £1.9bn six-month average, pushing annual growth up to 9.6% from 9.3%.
Credit cards account for almost half of it. Net card borrowing rose to £1.2bn from £0.9bn, and card debt is now 13.3% higher than a year ago, up from 12.6% in July. Car finance and personal loans added a further £1.3bn.
What makes this uncomfortable is the price. The effective rate on interest-charging cards is now 21.55%, against 9.96% on a personal loan. Households are drawing back from mortgages at around 4.6% while leaning harder on cards at more than 21%, and that looks a good deal more like pressure on cash flow than a spending spree.
None of this is systemic yet. But card debt growing at more than 13% a year at those rates deserves closer attention than it is getting.
A better month for business borrowing
Companies had a busier month. PNFCs raised £7.7bn of net finance after close to nothing in July, with £5.7bn coming through bank loans, a sharp turnaround from £0.9bn of net repayments the month before. They also bought back £1.6bn of their own shares.
On the Bank’s broader measure, UK non-financial businesses borrowed £4.1bn, £3.2bn of it by large companies and £0.9bn by SMEs. SME borrowing growth picked up to 4.6% from 4.1%, while growth in large-company borrowing eased to 8.9% from 9.4%.
It would be a stretch to read an investment revival into a single month, particularly when new bank loans are costing firms 5.57% on average and SMEs 6.63%.
| Series | Aug 2026 | Jul 2026 (revised) | Change |
|---|---|---|---|
| House-purchase approvals | 54,900 | 55,900 | ▼ −1,000 |
| Remortgaging approvals | 34,000 | 34,600 | ▼ −600 |
| Net mortgage borrowing | £4.4bn | £4.1bn | ▲ +£0.3bn |
| Effective rate, new mortgages | 4.60% | 4.45% | ▲ +0.15pp |
| Consumer-credit net borrowing | £2.5bn | £2.1bn | ▲ +£0.4bn |
| Consumer-credit annual growth | 9.6% | 9.3% | ▲ +0.3pp |
| Credit-card annual growth | 13.3% | 12.6% | ▲ +0.7pp |
| Effective rate, credit cards | 21.55% | 21.45% | ▲ +0.10pp |
| PNFC net finance raised | £7.7bn | ~£0.0bn | ▲ +£7.7bn |
| SME bank borrowing | £0.9bn | £0.9bn | — |
| M4Lex monthly flow | £3.9bn | −£0.1bn | ▲ +£4.0bn |
| M4Lex annual growth | 6.1% | 6.4% | ▼ −0.3pp |
| M4ex monthly flow | £16.2bn | −£9.8bn | ▲ +£26.0bn |
| M4ex annual growth | 4.4% | 4.3% | ▲ +0.1pp |
Why This Matters
M4ex is the number GBTT watches most closely, and at 4.4% it is not telling the MPC that inflation is being fed by excess money. On GBTT’s monetary framework, the Bank is dealing with an imported energy shock, and there is no sign of domestic monetary excess returning.
Three members of the Committee would still like to go further. In the decision published on 17 September, Bank Rate was held at 3.75% by six votes to three, with Megan Greene, Catherine L Mann and Huw Pill voting to raise it to 4%. The Committee as a whole judged that the risks to inflation had tilted further to the upside, with CPI at 3.1% in August and likely to rise.
August’s figures give the hawks little to work with. Borrowing costs are already rising with Bank Rate on hold, mortgage approvals are falling and broad money is growing at a moderate pace.
The part of the September decision that deserves more attention is QT. The MPC voted unanimously to run down the remaining £368bn of gilts held for monetary-policy purposes by the end of 2034, partly as they mature and partly through planned sales of £20bn a year. How those sales are carried out now matters a great deal. Conventional APF auctions have been paused while the Bank and the Treasury look at selling the gilts to the Government through the DMO, with a decision due by April 2027. Selling gilts directly to non-banks extinguishes deposits; selling them to Government works differently. With M4ex at 4.4%, the Bank ought to be paying far closer attention to that distinction than its framework encourages.
GBTT’s view remains that the medium-term direction for Bank Rate is lower unless the energy shock starts feeding into persistent domestic inflation, and nothing in today’s money and credit numbers changes that.
What This Means for the Economy
For households, August tells two quite different credit stories. Mortgage approvals are falling as borrowing costs rise, while unsecured credit is growing at close to 10% a year and credit cards at more than 13%. Taken together, that points to squeezed household budgets rather than a consumer boom.
Broad money at 4.4% says the macro picture is stable. The credit mix says a growing number of households are not.
Sources
- Bank of England, Money and Credit Statistical Release, August 2026: published 29 September 2026, 9:30am. All monthly flows, annual growth rates, effective interest rates, six-month averages and July revisions quoted in this note.
- Bank of England, Interactive Statistical Database, series RPMB56Q (M4ex, 12-month growth rate, seasonally adjusted) and LPMVTVX (approvals for house purchase, seasonally adjusted), fetched live 29 September 2026. Used for the chart, the "lowest since December 2023" comparison and the August 2025 approvals figure (65,364).
- Bank of England, Money and Credit, July 2026: June 2026 effective new-mortgage rate (4.35%), as reported in GBTT's July note.
- Bank of England, Monetary Policy Summary and Minutes, September 2026: published 17 September 2026. MPC vote, named members, risk assessment, August CPI reference and the gilt stock reduction decision.
- Bank of England, Asset Purchase Facility: Gilt Sales – Market Notice, 17 September 2026: pause of APF auctions, proposed sales to Government via the DMO, review before April 2027. £368bn = £488.2bn total APF holdings less £120.0bn retained to back banknotes (Table 1, purchase proceeds terms).
- GBTT, "July unwinds June's credit spike — broad money growth falls back to 4.3%": Money & Credit, July 2026, published 1 September 2026.
- GBTT estimate: the 4–4.5% M4ex benchmark band is GBTT's own indicative range, not an official Bank of England target.