Approved mortgages reached their highest in the last 13 years
UK lenders approved 97,532 mortgages in October, the most since September 2007, Bank of England money and credit data shows.
The housing market has become more active as 92,091 were given the green light in September, compared with 85,704 in August.
Before the pandemic, 73,384 mortgages were approved in February, before the number fell to 9,335 in May.
“The housing market continues to defy logic.”
Nitesh Patel, Strategic Economist at the Yorkshire Building Society, said: “The housing market continues to defy economic logic, despite difficult economic conditions caused by the global Covid-19 pandemic and uncertainty about the UK trade deal with The EU.”
“The pent-up demand for the closure has been driven by buyers looking for larger homes that accommodate work-at-home and more yard space, and the reduction in stamp duty may have attracted opportunistic buyers who were previously discouraged by high transaction costs.”
“There is good reason to believe that homeowners with large amounts of equity in their homes are the most active, with first-time buyers accounting for a smaller share of approvals.”
“These are temporary factors, in particular the reduction of the stamp tax that, in its current state, ends on March 31 of next year. Given that the economy will remain weak and unemployment is likely to rise when the job support plan comes to an end, we should see real estate activity start to decline in the second quarter of 2021.”
But Richard Pike, director of sales and marketing at Phoebus Software, said: “It is not just the stamp duty savings that are driving the market; there is also the number of people looking to escape city life since closing. And, as the ‘work from home’ culture continues, this is likely to exceed the limitations imposed by Covid-19.”
“The problem then will be the old one of supply and demand. According to last week’s ONS, we are far behind our goal for new home construction in the past year despite government promises. With the domino effect of the pandemic, this is something that will not be fixed quickly. So the predicted mass exodus from our cities could turn into a trickle in the spring.”
Tomer Aboody, director of real estate lender MT Finance, said: “This is an opportunity for many potential buyers who in the past could not afford or preferred not to buy, go and buy, locking themselves in a longer-term mortgage rate at a reasonable level and with a deposit low enough that it doesn’t affect your savings too much. This, along with the stamp duty break, has boosted the market and helped drive property prices.”
“Unlike in 2007, we must have confidence in the banking sector, which is very liquid, in addition to having confidence in the market. We may be living with a pandemic, but hopefully, this will be under control in a short time, allowing us to get on with our lives before too much damage is done to the economy.”
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