Net mortgage borrowing bounced back to £6.6 billion in May, according to the latest Bank of England data. This followed variability in the previous couple of months in anticipation of the reduction in stamp duty ending, which has been extended to the end of June.
Net borrowing was £3.0 billion in April, following a record £11.4 billion of net borrowing in March. Net borrowing in May was slightly higher than the monthly average for the six months to April 2021 and above the average of £4.2 billion in the year to February 2020. Gross lending was a little higher at £24.2 billion, while gross repayments dropped to £18.9 billion.
Gareth Lewis, commercial director of property lender MT Finance, said: “The approaching end of the full stamp duty holiday led to a surge in net mortgage borrowing, hitting record highs in June. But while this deadline focused buyers’ minds, consumer confidence has remained relatively high since then. Buyers have continued to proceed with their transactions where they missed the deadline, aware that they can still take advantage of some stamp duty savings before the end of September.
“With many people taking much-needed holidays, the market is noticeably quieter. It will be interesting to see how it picks up again in September, once people are back from holidays and the children return to school. Will that final push to take advantage of the tail end of the stamp duty holiday result in another uptick in transactions, keeping prices high?”
Approvals for house purchases increased slightly in May to 87,500, from 86,900 in April. They have fallen from a recent peak of 103,200 in November but remain above pre-February 2020 levels.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “As expected, these numbers are very strong, reflecting the frenzy as buyers tried to beat the stamp duty taper at the end of June.
“However, they don’t reflect what happened immediately afterwards and whether that level of activity was able to be sustained. We will be looking very closely at the next set of figures for mortgage approvals in particular as they always provide a useful direction of travel for the market. Only then will we be able to see just how far activity has fallen but certainly we don’t expect a major change based on what has been happening in the past few weeks on the high street.”
The ‘effective’ rate – the actual interest rate paid – on newly drawn mortgages rose 2 basis points to 1.90% in May. That is marginally above the rate in January 2020 (1.85%) and compares to a series low of 1.72% in August 2020. The rate on the outstanding stock of mortgages remained unchanged at a series low of 2.07%.
John Phillips, national operations director, Just Mortgages and Spicerhaart said: “The housing market continues to show us how buoyant it is. Even with the slight dip in activity, it’s still a great time to be a broker.
“Although the market is cooling as the stamp duty holiday deadline has come and gone, we are still witnessing an incredibly active market. Borrowing reached a record high in June, which is unsurprising when we consider that house prices have experienced a surge this year. Even without the stamp duty holiday, there is still a wave of buyers looking to move and this will undoubtedly drive activity until at least the end of the year.
“With over 56% of the population now fully vaccinated in the UK, people really start to think about what the ‘new normal’ looks like. For many, this will mean a hybrid working pattern. Thanks to this, people are able to look further afield for property with more space as the commute time isn’t so daunting. Recent reports claim that buyer demand for properties in the outer boroughs of London is up by as much as 86%.
“It’s an exciting time to be a broker, and this morning’s figures only reaffirm that message.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, added: “The lending market remains strong with some rock-bottom mortgages to tempt borrowers. Lenders have plenty of cash to lend and are keen to do so, with two- and five-year fixes available from sub-1 per cent and no sign of this situation changing anytime soon.”
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