The number and value of mortgage approvals for property purchases reached a new post-credit crisis high in October and lending values returned to last year’s level, according to the Bank of England.
The figures highlight the stunning turnaround in the housing market over the last six months and explain the scale of the challenge facing the industry as borrowers aim to complete by the stamp duty holiday deadline of 31 March.
There were 97,500 approvals for purchases, up from 92,100 in September, the highest figure since September 2007. And purchase approvals last month were worth £20.6bn – the highest total ever.
The number of purchase approvals was 33 per cent higher than in February 2020 and around 10 times higher than the trough of 9,400 in May, the central bank noted.
Overall mortgage approvals also hit a post-crisis high of 142,759 and were worth a combined £27.4bn in October, the highest since January 2008.
Lending volumes return to normal
The value of all mortgage completions issued in October also fully recovered to £21.45bn, all but matching October 2019’s value of £21.49bn.
If the market continues its current trend the lending totals of between £22.2bn and £22.7bn from November 2019 to January 2020 are likely to be surpassed.
The actual interest rates paid on newly drawn mortgages ticked up by four basis points to 1.78 per cent in October, the bank added.
It noted that new mortgage rates have risen back to their level in June, but remain below the 1.85 per cent in January. The rate on outstanding mortgages was little changed at 2.12 per cent in October.
‘Defies economic logic’
The strength of demand has surprised many within the industry, especially as this is typically a quieter time of the year.
Hometrack managing director David Ross said: “While our data shows a slowing down in new mortgage applications in November, this is the busiest pre-Christmas housing market for over a decade with 100,000 additional sales to be completed before the end of March 2021.”
Meanwhile Yorkshire Building Society strategic economist Nitesh Patel was more cautious.
“The housing market continues to defy economic logic, despite challenging economic conditions caused by the global Covid-19 pandemic and uncertainty over the UK’s trading deal with the EU,” he said.
“There is good reason to believe that homeowners with large amounts of equity in their homes are the most active, with first-time buyers making up a smaller proportion of approvals.
“These are temporary factors, particularly the stamp duty cut which, as it currently stands, ends on 31 March next year.
“With the economy set to remain weak and unemployment likely to rise when the job support scheme comes to an end, we should see housing activity start to decline in the second quarter of 2021.”
However, former Royal Institution of Chartered Surveyors residential chairman Jeremy Leaf was more upbeat.
“Judging by what has been happening on the ground since, we expect the numbers to remain robust for at least the next month or two until the reduction in activity which we have noticed over the last few weeks as the stamp duty deadline draws close, begins to have an impact on transaction numbers.
“The underlying strength of the market does not appear to be waning, at least for the time being.”
Owain Thomas is features and contributing editor of Mortgage Solutions and editor of Specialist Lending Solutions.
He also has experience in the protection, pensions, workplace benefits and HR areas.
Owain has won two Headline Money Awards and the Protection Review’s Journalist of the Year award.