Stamp Duty Holiday extension causes increased demand for mortgages.
According to the Bank of England, there has been strong demand for mortgages since April.
Rishi Sunak’s six-month extension of the government stamp duty holiday triggered a further surge in demand for home loans, according to the latest figures from the Bank of England.
Data from Threadneedle Street showed that in April, the month after the Chancellor’s budget announcement, the number of mortgage approvals rose from 83,400 to 86,900, the first monthly increase since November.
The chancellor had originally planned to end the home tax exemption of up to £ 500,000 at the end of March but instead decided to scrap the scheme in two stages in June and September.
Analysts said the decision had given an additional boost to an already strong housing market, with real estate agents reporting increased interest from buyers.
“The extension of the Stamp Duty Holiday has had a great impact”
Andrew Wishart, a real estate economist at Capital Economics, said that even when the economy stalled in February and March, mortgage approvals were well above their pre-crisis average of 65,000 a month.
“Overall, the extension of the stamp tax holiday appears to be leading to a renewed acceleration in housing market activity,” Wishart said. “But the robustness of the data for February and March, when the original deadline was looming, suggests that buyer demand will be resilient until the end of this fall’s tax break, with demand supported by low mortgage rates and a strong economic recovery.”
High house price inflation over the past year and the return on high-value loans meant that the average size of approved mortgages increased from £ 206,900 in April 2020 to £ 232,400 in April 2021, an increase from 12.3%.
The Nationwide Construction Society reported this week that home price inflation had hit 10.9% in May, and said it expected demand for properties to remain strong even as the ceiling for the homestead tax exemption. Stamp duty will drop to £ 250,000 by the end of this month. At the end of September, stamp duty will be paid on all home sales over £ 125,000.
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