The number of mortgages handed out to homebuyers soared by 40% last month to near pre-covid levels as the housing market continues its recovery from the coronavirus pandemic.
Mortgages approvals for house purchase reached 66,300 in July, up 40 per cent from 39,900 in June and just below the 67,300 recorded in July 2019, the latest data from the Bank of England show.
It means they are now 10 per cent below the 73,700 mortgage approvals recorded in February, just before the coronavirus pandemic took hold.
In demand: Mortgage approvals continue to recover, aided by the recently introduced stamp duty holiday which exempts buyers from paying the tax when buying homes up to £500,000
The lockdown, with the closure of estate agents and buyers unable to view properties, brought the housing market to a halt, with mortgage approvals hitting a record low of 9,300 in May.
But estate agents around the country have been observing a ‘mini-boom’ in demand over the past couple of months since the gradual reopening of the housing market in May.
This is being aided by a cut in stamp duty introduced by the Chancellor Rishi Sunak in mid-July, which exempts buyers in England and Northern Ireland from paying the tax when buying homes up to £500,000 until 31 March 2021.
Experts say mortgage approvals will likely rise further next month, when more buyers are expected to take advantage of the stamp duty holiday.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: ‘Mortgage approval numbers always provide a useful lead indicator of direction of travel for the property market in the coming months.
‘Unfortunately, these figures relate to the period when we were emerging from lockdown but before the full benefit of the stamp duty holiday was being felt.
‘Contact with mortgage brokers or lenders is not always the first thought of aspiring buyers. As a result, these approvals do not reflect the stronger upsurge we noticed across most property types and price ranges from the beginning of August.’
Looking like a ‘V-shaped’ recovery? Mortgages approvals for house purchase reached 66,300 in July, up 40% from 39,900 in June
Gareth Lewis, commercial director of property lender MT Finance, added: ‘There are positive signs indicating plenty of consumer confidence out there as people are borrowing money.
‘There are more “for sale” and “sold” signs springing up, and even tales of gazumping. August’s numbers will show even more of an uptick in transactions once the stamp duty holiday starts to filter through to the figures.’
However, economists remain cautious about the longer-term outlook for the property market as the furlough scheme begins to be unwound and unemployment is expected to rise.
Credit card borrowing is still down about 10 per cent compared to a year ago, data show
Consumer borrowing rose for the first time in four months in July, figures show
Howard Archer, chief economic advisor to the EY ITEM Club, said: ‘Many people have already lost their jobs, despite the supportive Government measures, while others will be concerned that they may still end up losing their job once the furlough scheme ends. Additionally, many incomes have been affected.
‘Consumer confidence is still low compared to long-term norms and many people are likely to remain cautious for some time to come when making major spending decisions such as buying or moving house.’
Meanwhile, the gradual lifting of the lockdown restrictions also had an impact on demand for loans, credit card borrowing and overdrafts, with consumer borrowing rising for the first time in four months.
The Bank of England’s data show that net consumer borrowing increased £1.2billion July, following four months of repayments between March and June, when Britons repaid some £15.9billion worth of debt (excluding mortgages).
But lending on credit cards, which was £600million in July, remained down about 10 per cent compared to a year ago.
The weakness of demand for credit cards and loans between March and June meant the annual growth rate remained negative at -3.6 per cent despite July’s increase in borrowing, and was the weakest since records began in 1994.
Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.