Demand from homebuyers remains exceptionally high across the UK as people look to take advantage of low interest rates and the current stamp duty holiday, which is expected to be extended beyond the current 31 March deadline.
According to the latest Bank of England’s Money and Credit statistics, net mortgage borrowing remained at £5.2bn in January, up from the monthly average of £4bn in the six months to February 2020, as buyers rush to take advantage of favourable market conditions.
The data shows that there were 99,000 mortgage approvals for property purchase in January, in line with the average of 100,000 since October 2020.
In addition, effective interest rates on new mortgage borrowing dropped to just 1.85%, which is comparable with the rate recorded in January last year.
The rate on the outstanding stock of mortgages fell to 2.09% which is a new series low.
David Whittaker, CEO, Keystone Property Finance, said: “The statistics show that the housing market remained resilient as the new year kicked off, with demand for property continuing to rise as people take advantage of low interest rates and the stamp duty holiday.
“However, it’s clear that mortgage transactions are beginning to slow as the impact of the third national lockdown on consumer confidence and uncertainty about the future of the stamp duty holiday takes hold.
“In addition, while demand for property has remained strong, data shows that the supply of new property has decreased since the beginning of the year.”
Iain McKenzie, chief executive of the guild of property professionals, added: “Despite January traditionally being a slower month for purchasing a home, these figures show the stampede to buy property before the stamp duty holiday ends.
“It is good news for the wider economy that there is still interest in moving up the property ladder and consumer confidence in mortgages is still robust.
“Consumers are also repaying debts at an incredible rate, which can be partly ascribed to the savings that many employees are making by working from home.
“However, this could also indicate a lack of confidence in how the economy will fare this year, as people are choosing to pay down debts rather than spending the extra cash.
“Interest rates on mortgages are some of the lowest we’ve seen in a long time, and this could be another strong year for the housing market.”
Comments (4)
When the figures are read in context in the actual report, there is no suggestion of any stampede.
The BoE describe the £5.2bn as “Robust”. When comparing the six months average up to October 20 at £4bn, these figures take into account the lowest number of mortgage approvals in April to July. Never going to be a difficult average to exceed, particularly considering the number of mortgage approvals historically in the last quarter.
That said, 2020 Mortgage approvals for house purchase in 2020 (818,500) were marginally higher than in 2019 (789,100), notwithstanding house purchase approvals hitting a record low of 9,400 in May 2020.
In December 20, Net mortgage borrowing remained strong at £5.6 billion. Effective interest rates on new mortgage borrowing rose to 1.90%, the highest since October 2019.
So, January 21 actually mortgage borrowing actually fell by £.4bn and rates fell only marginally to 1.85%. Nor quite the stampede or ‘“Interest rates on mortgages are some of the lowest we’ve seen in a long time”
With regards to Consumer debt, this has continued to fall after rising during the summer months by some 19.4% (Credit Card debt) over the past 12 months. Partly as result of a fall in new borrowing each month by 8.9% over the past 12 months.
Taken both the travel and airline industry, hospitality industry, the motor industry, and the retail sector having been mauled by Covid, I suspect the savings on these items have benefitted households far more than working from home.
Historically, consumers in recessionary times, do save harder, fearing hardship. This may well account for the 6m “Accidental savers” being aged over 55.
Anecdotal evidence, however, suggests this spare income may well be spent back in the Pubs & Restaurants, Holidays and socialising in general as has been the case in Australia after their 4 month lockdown.
“A boom in household spending drove the recovery as the easing of social distancing restrictions prompted a 7.9 per cent jump in spending on goods and services in the third quarter.
The recovery represents Australia’s largest quarterly increase in GDP since 1976” – FT
Demand can be as high as it likes but while boomers and institutional investors own a lot of first homes, while the property ladder is over extended, while 2nd home owners own, while couples are retaining the 2nd property in a relationship to short let, while low interest rates make it all so affordable to keep hold of properties or retain them from an estate, supply is the issue.
there are already a shortage of about 150,000- 200,000 properties and Rishi is about to turn Generation Rent into Generation Resentment as the frustration of not finding some thing to buy becomes a reality.
Feeling good about chance of owning a home might very quickly turn to despair once all the toxic leasehold properties, all the cladding blighted stock, all the not coming to the market and all the can’t move because there’s nothing to move to properties are taken out of the equation.
In others words we are in sh** 🙂
Margaret Thatcher created the same scenario in the mid 80’s which created all sorts of mayhem that didn’t resolve until 1994
Rishi has to find a way of creating supply.
Tax the heck out of short lets (40% deducted at source) they keep AST and family homes out of the supply chain and compete with Hotels, Guest Houses and B&B ( Sub 40sqm accommodation exemptions/ exceptions)
A CGT amnesty for landlords selling to periodic tenants with tenancies back to the 19-20 tax year
Taxation of the full rental value of properties owned as second homes. (or primary principal residence if the 2nd home is being used as a covert covid hideout)