UK Achieves Highest Mortgage Approval Rate in 13 Years
The stamp duty holiday has been the main reason for this mortgage boom.
Mortgage approvals in the UK have risen to the highest level in 13 years, driven by the government stamp duty holiday and buyers reassessing their living situation during the coronavirus pandemic.
Figures from the Bank of England showed that the number of mortgages approved by banks and building societies for home purchases had raised to 105,000 in November, the highest number since August 2007, the month immediately before they were formed. Queues outside Northern Rock branches early in the financial crisis.
Threadneedle Street said the number of monthly approvals had risen by 7,700 from October’s level, reflecting a boom in the mortgage market during the month when rapid growth in Covid infections led the government to impose a second national lockdown in England.
This trend will continue until the stamp duty holiday ends.
During Covid’s first lockdown, home loans plummeted as the crisis plunged the UK economy into the deepest recession in 300 years, hitting a low of just £ 200 million from April 2020 to October.
The number of new mortgage approvals, which provide an early indicator of debt levels in coming months when buyers accept their mortgage offers, has more than tenfold, after hitting a low of 9,400 in May.
The Bank’s figures also showed that households repaid £ 1.5bn in credit card debt, personal loans, and car finance in November, reflecting weaker consumer spending during the second national lockdown.
Since the start of the pandemic in March, households have repaid £ 17.3 billion of consumer credit, according to the Bank, countering the trend in recent years of rapid growth in credit card lending.
While many low-income workers have suffered a financial hit during the pandemic, total household deposits rose by almost £ 5bn in the month to reach £ 17.6bn as people saved money. At the same time, a large part of the main street was closed.
Despite the boom in mortgage approvals, equivalent to the last days of the housing bubble of the mid-2000s, when no-deposit mortgages were still widely available, analysts are warning that a sharp drop in activity is coming.
The UK property market boomed in 2020, and property prices skyrocketed to a six-year high as people rushed to take advantage of the stamp duty holiday and reassessed their living arrangements during closing.
However, mortgage lenders and economists warn that the end of the stamp duty holiday in March and rising unemployment could trigger a collapse in house prices in 2021. Halifax, Britain’s largest mortgage lender, estimates an annual drop of between 2% and 5%, while the Office of Budget Responsibility, the government’s economic forecaster, is more pessimistic and predicts a drop of 8%.
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