Commenting on today’s Bank of England Money and Credit report (February), Nitesh Patel, Strategic Economist at Yorkshire Building Society, said:

February’s Money and Credit data from the Bank of England suggests that, on one hand, economic activity continues to hold up better than expected and on the other, there are signs that for some households the cost of living crisis might be beginning to bite. 

Mortgage data suggests housing purchasing activity continued to hold up well particularly when compared to the pre-pandemic figures for 2019. The £4.7bn rise in net mortgage lending and 70,972 mortgage approvals were both higher than their pre-pandemic averages of £4.1bn and 65,700 respectively. Whilst these are down from January, they remain high for this time of the year. Low borrowing costs, a strong jobs markets and importantly remote working are key drivers – and will remain so for the next few months.

However, on the savings side the stock of deposits grew by under £4 billion, down from £7.1 billion in January and smaller than the pre-pandemic 2019 average of £4.6bn. With consumer price inflation rising at a faster rate than earnings growth some households may already be dipping into their savings to finance their spending - a clearer picture should emerge in the coming months.

With real earnings expected to fall this year and if borrowing costs rise then this should dampen consumer spending and slow housing market activity, and particularly house price growth, which would be welcomed by potential first-time buyers.


All information correct at time of publication.