Mortgage approvals hit 13-year high

The number of UK mortgage approvals rose to their highest level since before the 2008 global financial crisis last month, according to new figures from the Bank of England.

The rise saw the number of mortgages approved for home purchase rise in the wake of chancellor Rishi Sunak’s announcement of a temporary stamp duty holiday to 84,700, the highest figure since October 2007.

The new figures are the latest to show the strength in the housing market since the removal of lockdown restrictions on buying and selling homes in May, and come as estate agent Savills released bullish new forecasts for house price growth over the next five years.

The Bank of England figures represent a turnaround after mortgage approvals fell to a lowest ever figure of just over 9,000 in May. However, despite the sharp spike, the high number of mortgage approvals made since lockdown has not yet made up for the drop seen between March and June.

The Bank of England said 418,000 approvals to date in 2020, a fifth below the 524,000 seen in the same period in 2019.

The Bank also released data showing the amount actually lent by banks rose in August to £18.8bn, up from £15.9bn in July. However, net lending of £3.1bn remained below the levels seen prior to the pandemic in February.

The figures come a day after the first data was published indicating the post lockdown surge in the housing market might be running out of steam. Property portal Zoopla said first time buyers were increasingly struggling with a lack of availability of mortgages at high loan to value rates, coupled with economic insecurity, leading to a decline in demand, while an analysis of internet search terms by Pantheon Macroeconomics suggested demand to move house has now peaked.

Despite this, Savills today published revised house price forecasts reversing its previous predictions of sharp house price falls laid out in June. The estate agent said it expected average prices to end 2020 4% up on 2019, where just three months ago it was expecting a 7.5% slide in prices.

It said prices will remain flat in 2021, with no growth at all, before showing strong growth underpinned by low interest rates from 2022 onward.

Lucian Cook, Savills head of residential research, said: “While we clearly can’t ignore the economic backdrop, other factors, including a stamp duty holiday, have unleashed an unexpected wave of activity in the market and added to the pent up demand coming out of lockdown.

“Many people are reassessing their work-life balance, seeking a change of location or a trade up the ladder. The unexpected stamp duty holiday has given a further boost to the market particularly in higher value locations through the commuter zone and lifestyle relocation hotspots.”

Commenting on the Bank of England figures Marc von Grundherr, director of estate agent Benham and Reeves, said the firm had seen “little to no let-up in the volume of homebuyers hitting the market” despite the tightening of mortgage lending. “Since the stamp duty holiday was announced, the number of mortgage approvals seen on a monthly basis has more than doubled, and so the boost it has given the market can not be underestimated,” he said.