UK homeowners are repaying £ 1.4bn of mortgage debt more than they paid in July.
The end of the Stamp Duty Holiday boosted UK mortgage applications.
UK homeowners made a rare net payment on mortgage debt in July as reduced stamp duty holidays in England and Northern Ireland fueled a drop in housing market activity after a record June.
The Bank of England said people collectively paid £ 1.4 billion more in mortgage debt than they borrowed in the first net payment since the housing market came to a halt during the first wave of Covid-19 in April. 2020.
Threadneedle Street said it was only the second net repayment in a decade. It followed the record loan of £ 17.7 billion in June in the final month of the holiday tax exemption in England and Northern Ireland.
Until June 30, the first £ 500,000 spent on a property was tax-free, saving a buyer up to £ 15,000. On July 1, the tax exemption was lowered, with the threshold at which the property purchase tax begins to drop to £ 250,000. This so-called ‘zero rate band’ will return to its pre-pandemic level of £ 125,000 on 1 October. The Welsh government removed a stamp tax holiday at the end of June, while the Scottish government ended a similar tax exemption at the end of March.
The latest figures showed that mortgage approvals for home purchases, an indicator of future loans, fell further in July to 75,200, hitting the lowest level since July 2020 before Chancellor Rishi Sunak first launched exemption from stamp duty. However, approvals remained above pre-pandemic levels, in a sign of continued high activity in the housing market despite the liquidation of the tax benefit.
UK home sales have slumped since June after consumers scrambled to take advantage of the stamp duty holiday. Figures from HMRC show a record spike in activity in June, when 213,370 UK households changed hands, followed by a drop in July when transactions collapsed 62% to 82,110.
Figures compiled by mortgage lenders Halifax and Nationwide show that the housing price boom during the pandemic has cooled off since the end of the stamp duty cut. The average home value in the UK soared by £ 31,000 during the year to the end of June, reaching £ 266,000, the fastest annual rate of property inflation since 2004. Along with the reduction in stamp duty, the Prices increased as buyers turned away from smaller houses in the inner city to larger properties in the suburbs and the countryside during the pandemic.
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