Commenting on the mortgage lending figures from today’s Bank of England Money & Credit Report (June), Nitesh Patel, Strategic Economist at Yorkshire Building Society, said:

June’s Money and Credit data from the Bank of England on household finances suggests that the cost-of-living crisis might be beginning to bite.

Mortgage data shows house purchasing activity continuing to slow with the number of mortgages for home sales falling to 63,726 in June, down from 65,681 in May and below the 12-month pre-pandemic average of 66,519. What’s more, outside of the first lockdown months of Spring 2020, this was the lowest level since March 2019.

Home sales have also slowed since January when there were 73,220 approvals. On one hand, the market will continue to be supported by a strong jobs market however on the other, house prices at a record high will raise affordability concerns for other buyers.

Perhaps the most striking figure in the report was on the savings side with the stock of deposits growing by just £1.5 billion, which is considerably below the pre-pandemic 2019 average of £4.6bn. In fact, this was the lowest monthly increase since April 2018. Furthermore, consumer borrowing – credit cards and loans – almost doubled from the previous month to £1.78 billion in June.

These latest figures are a far cry from the past couple of years when mortgage volumes grew rapidly, household savings were high and borrowing low. With consumer price inflation rising at the fastest rate in 40 years and real earnings growth falling sharply, it looks households’ may already be dipping into their savings to finance their spending.

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