Mortgage approvals for house purchases increased to 91,500 in September, the highest level seen since 2007.
According to the Bank of England’s (BoE) Money and Credit figures for September, this was a jump from August’s 85,000 approvals and 24 per cent higher than the approvals in February, before the nation went into lockdown.
The rise in approvals was also evident in the value of borrowing as net mortgage borrowing rose to £4.8bn in September, up from £3bn the month before.
This puts net borrowing higher than the £4bn average seen in the six months to February 2020.
Gross mortgage borrowing was recorded at £20.5bn in September, up from £17.8bn the previous month.
Interest rates remained largely unchanged in September with new mortgage rates averaging at 1.74 per cent, up by two basis points while the rate on existing mortgages dropped one basis point to 2.13 per cent.
Property professionals said the strength of mortgage approvals was boosting property prices, seen in recent record high asking prices and solid annual house price growth.
Tomer Aboody, director of MT Finance, said: “Looking at the mortgage approvals, which are the highest since the 2007 peak, it’s not surprising that there has been a corresponding rise in property prices.
“The feeling and concern is that buyers are feeding into an artificially strong market, which has been driven by historically low mortgage rates and a rush to complete transactions before the end of the stamp duty holiday in March.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, added: “Those expecting a correction in house prices or activity will be disappointed by these figures which are always a good indication of direction of travel.
“Unless buyers suddenly change course and cancel mortgage offers, most of these are likely to turn into transactions. Once again the market is proving its resilience despite growing uncertainties over additional restrictions and worsening economic news.”
Lenders playing their part
Although approvals are at a high, brokers have said lenders need to continue doing their bit to ensure products remain available and more borrowers are not affected by risk-based decisions.
Andrew Montlake, managing director at Coreco, said: “As welcome as these mortgage figures are, it’s common knowledge that the post-lockdown bull run is already over.
“Lenders have been pulling down the shutters due to ongoing struggles with capacity and concerns over rising unemployment levels, specifically the impact on house price growth.
Montlake added: “What’s crucial is that the major lenders don’t go too far and start pulling products for more robust borrowers with larger deposits. As surreal as 2020 has been, the onus is on lenders to keep it real as we enter the winter months.
“There are still many landlords and owner-occupiers with equity and decent incomes, who are perfectly viable borrowers, and the banks shouldn’t forget this.”
Mark Harris, chief executive of SPF Private Clients, said: “Given that the government currently has no plans to extend the stamp duty deadline – although we wouldn’t necessarily take their word on that as things often change – it is focusing buyers’ minds on getting deals done over the next four to five months.
“Some lenders are struggling with service levels caused by this increase in demand but not all lenders. There is no point in trying to get a mortgage from a lender who is six months behind if you need to exchange in four weeks.”
“We desperately need more support in the high loan to value (LTV) space – it isn’t necessarily a risk issue with lenders, more a service issue, as they try to control volumes, and we hope this will improve in coming months,” Harris added.
Shekina is a reporter at Mortgage Solutions. She has over two years experience in the B2B publishing market, with previous industries including the pet, funeral, hospitality, retail and jewellery trades.
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