July unwinds June's credit spike — broad money growth falls back to 4.3%
The extraordinary jump in bank lending recorded in June disappeared almost completely in July, while broad money growth fell back to 4.3%.
The Bank of England's latest Money and Credit figures reinforce GBTT's warning not to mistake June's highly volatile financial-sector lending for the start of a general credit boom.
Key Points
- Broad money growth fell back to 4.3%. Annual M4ex growth declined from a revised 4.9% in June, returning to GBTT's indicative 4–4.5% range.
- June's extraordinary lending spike disappeared. The monthly flow of M4Lex — bank lending to households and private-sector companies — fell from £39.1bn in June to effectively zero in July.
- The reversal was again dominated by non-bank financial companies. NIOFCs borrowed £28.5bn from banks in June but repaid £7.0bn in July.
- The mortgage market cooled. Net mortgage borrowing dropped from £7.7bn to £4.3bn, below its previous six-month average of £5.3bn. House-purchase approvals fell from 58,200 to 56,100.
- The effective rate on newly drawn mortgages rose to 4.45%, from 4.35% in June, despite the fall in borrowing.
- Unsecured credit remains the uncomfortable part of the release. Consumer-credit growth edged up from 9.1% to 9.2% annually. Credit-card borrowing remained 12.5% higher than a year earlier despite an effective interest rate of 21.45%.
- Business finance remained weak. Private non-financial companies raised virtually no net finance during July, while SME bank borrowing edged up from £0.7bn to £0.8bn.
July puts June's extraordinary credit number into perspective.
M4Lex — essentially sterling bank lending to UK households and private-sector companies — jumped by £39.1bn in June. In July, the flow was effectively zero.
The reason is clear. NIOFCs — a volatile group of non-bank financial companies, including investment and other financial vehicles — borrowed £28.5bn from banks in June. A month later they repaid £7.0bn.
That is a swing of £35.5bn from one month to the next in a particularly volatile part of the financial system.
Households and ordinary businesses did not suddenly embark on a borrowing spree in June and stop again in July. The surge came overwhelmingly from financial companies whose borrowing can move sharply because of portfolio management, liquidity and liability-matching decisions.
That was why GBTT cautioned against treating June as evidence of a credit boom. July strengthens that conclusion considerably.
There is a separate NIOFC effect in the money figures. M4ex measures holdings of broad money rather than lending. NIOFC money holdings increased by £4.8bn in June, but fell by £14.0bn in July. That helped take the total monthly M4ex flow from +£15.5bn to −£10.1bn.
For monetary policy, the more useful signal is therefore the twelve-month growth rate rather than either of these extremely volatile monthly flows. Annual M4ex growth fell from a revised 4.9% to 4.3%.
That brings it back inside GBTT's indicative 4–4.5% range.
Mortgages: June's jump also fades
The household mortgage data tell a similar, though less dramatic, story.
Net mortgage borrowing fell to £4.3bn in July from £7.7bn in June. That puts it below the previous six-month average of £5.3bn.
Gross mortgage lending fell from £26.9bn to £25.9bn, while house-purchase approvals — a useful guide to future borrowing — declined from 58,200 to 56,100. The latest figure is well below the previous six-month average of around 60,800.
Remortgaging approvals moved the other way, rising slightly from 34,100 to 34,500.
Meanwhile, the effective interest rate on newly drawn mortgages rose another 10 basis points, from 4.35% to 4.45%. That rate describes mortgages actually completed during the month and therefore does not necessarily track today's quoted mortgage rates exactly. But borrowers completing new loans in July were, on average, paying more than those completing them in June.
Taken together, this is not evidence of a housing credit boom.
Consumer credit: still the weak spot
Consumer credit deserves closer attention.
Households borrowed a net £2.0bn in July, up slightly from £1.9bn in June and just above the previous six-month average.
Annual consumer-credit growth edged up from 9.1% to 9.2%.
Credit-card debt was still growing particularly quickly, at 12.5% year-on-year, although that rate was unchanged from June. Net credit-card borrowing actually eased slightly during the month, from £1.0bn to £0.9bn.
The uncomfortable number is the price.
The effective interest rate on interest-charging credit cards was 21.45%.
Households continuing to expand unsecured borrowing at roughly 9% annually when some of that debt costs more than 20% is worth watching. It does not constitute a systemic credit boom, but neither should it be dismissed.
Businesses remain cautious
There is little evidence of a corporate borrowing boom either.
Private non-financial corporations raised virtually no net finance during July, compared with £2.4bn of net repayments in June.
Bank lending to SMEs rose modestly from £0.7bn to £0.8bn, while annual SME borrowing growth remained unchanged at 4.1%.
Large-company borrowing growth fell from 10.5% to 9.4%.
Again, the picture is mixed rather than expansionary.
| Series | Jul 2026 | Jun 2026 (revised) | Change |
|---|---|---|---|
| House-purchase approvals | 56,100 | 58,200 | ▼ −2,100 |
| Remortgaging approvals | 34,500 | 34,100 | ▲ +400 |
| Net mortgage borrowing | £4.3bn | £7.7bn | ▼ −£3.4bn |
| Effective rate, new mortgages | 4.45% | 4.35% | ▲ +0.10pp |
| Consumer-credit net borrowing | £2.0bn | £1.9bn | ▲ +£0.1bn |
| Consumer-credit annual growth | 9.2% | 9.1% | ▲ +0.1pp |
| Credit-card annual growth | 12.5% | 12.5% | — unchanged |
| PNFC net finance raised | ~£0.0bn | −£2.4bn | ▲ +£2.4bn |
| SME bank borrowing | £0.8bn | £0.7bn | ▲ +£0.1bn |
| M4Lex monthly flow | £0.0bn | £39.1bn | ▼ −£39.1bn |
| M4Lex annual growth | 6.4% | 6.7% | ▼ −0.3pp |
| M4ex monthly flow | −£10.1bn | £15.5bn | ▼ −£25.6bn |
| M4ex annual growth | 4.3% | 4.9% | ▼ −0.6pp |
Why This Matters
For GBTT, M4ex remains the key monetary number.
Monthly money flows can be extremely volatile, as June and July demonstrate particularly clearly. The annual growth rate provides the cleaner signal.
At 4.3%, M4ex growth is back around a pace GBTT regards as consistent with moderate nominal demand growth. Money is not sending the MPC an overheating signal.
That matters because the immediate inflation risk is coming principally from energy prices and the possibility of second-round effects, rather than an obvious domestic monetary overhang. The MPC itself noted in July that some members regarded the absence of such an overhang as giving the UK a more benign starting point for the latest energy shock.
The Committee nevertheless voted 6–3 to leave Bank Rate at 3.75%, with three members — Megan Greene, Catherine L Mann and Huw Pill — preferring an increase to 4%.
July's monetary and credit data weaken the case for that further tightening. Mortgage activity is subdued, broad-money growth has fallen back to 4.3%, and the extraordinary lending surge seen in June has disappeared.
GBTT's view remains that the medium-term direction for Bank Rate should be lower unless clear evidence emerges that the energy shock is feeding into persistent domestic inflation.
What This Means For The Economy
July is neither a credit-crunch release nor a credit-boom release.
It shows three rather different things happening at once.
The huge financial-sector lending flow that distorted June has reversed. Mortgage activity remains subdued. Consumer credit, meanwhile, continues to grow rather quickly despite exceptionally high borrowing costs.
The clearest monetary signal is therefore the least dramatic one: M4ex growth is 4.3%.
June looked like an acceleration. July shows that much of it was financial-sector noise. Broad money at 4.3% is the signal worth watching.
Sources
- Bank of England, Money and Credit Statistical Release, July 2026 — published 1 September 2026, 9:30am.
- Bank of England, Interactive Statistical Database, series RPMB56Q (M4ex, 12-month growth rate, seasonally adjusted) — full monthly series Jan 2019–Jul 2026 fetched live 1 September 2026 for the chart above.
- GBTT, "Britain's money growth is firming — but the credit surge is a false alarm" — Money & Credit, June 2026, published 29 July 2026.
- Bank of England, Money and Credit, June 2026 and July 2026 releases, for sectoral M4ex and M4Lex flows, including the NIOFC money-holdings breakdown (£4.8bn June, −£14.0bn July); Bank of England, July 2026 Monetary Policy Summary and Minutes, for the MPC vote and the Committee's discussion of the absence of a monetary overhang.