Mortgage borrowing strengthened in February with individuals borrowing an additional £6.2 billion secured on their homes.
This was supported by the expected ending of the temporary stamp duty tax relief at the end of March, which has now been extended to end of June.
February saw the strongest net borrowing since March 2016 (£7.2 billion), when borrowing was also boosted by changes in stamp duty.
The strength on the month reflected higher gross lending of £27.7 billion, close to March 2016 (£27.9 billion).
The strength in mortgage borrowing follows a large number of approvals for house purchase.
In February, there were 87,700, which – while down from a peak of 103,700 in November 2020 – was well above the monthly average in the six months to February 2020 (67,300).
Approvals for remortgage (which only capture remortgaging with a different lender) rose slightly to 34,300 from 32,600 in January 2021.
The ‘effective’ rate – the actual interest rates paid – on newly drawn mortgages rose 6 basis points to 1.91% in February.
That is slightly higher than the rate in January 2020 (1.85%), and compares with a series low of 1.72% in August 2020. The rate on the outstanding stock of mortgages remained at series low (2.09%).
CEO of Enness Global Mortgages, Islay Robinson, commented:
“A considerable reduction in the number of mortgage approvals was always on the cards as we approached the stamp duty holiday deadline.”
“However, those that were still committing to a purchase continued to take advantage of favourable interest rates with the sums lent continuing to climb to some of the highest levels seen in well over a decade.”
“Of course, with a stamp duty holiday extension now in place, we can expect this foot off the pedal to be a momentary trend and a further spike in buyer demand to reappear in the coming months.”
CEO of Keller Williams UK, Ben Taylor, commented:
“It’s becoming quite clear how impactful the current stamp duty holiday has been in driving homebuyer demand and even the mere sight of the original deadline appearing on the horizon was enough to substantially reduce mortgage approval levels.”
“That said, the market was far from teetering on the supposed cliff edge that the deadline was due to bring and homebuyers continued to flood the market with confidence.”
“Not since before the 2008 financial crisis have we seen such abundant levels of monthly mortgage lending and this bodes very well for the year ahead.”
Matthew Cooper, Founder & Managing Director of Yes Homebuyers, commented:
“Today’s mortgage approval figures provide a brief look at what faces the market when the stamp duty holiday does finally expire.”
“The substantial drop in approvals seen during February will no doubt reverse due to the boost of a stamp duty holiday extension announced in the March Budget.”
“However, it’s now clear that when it does finally come to an end, buyer demand is going to plummet.”
“When it does, the rate of house price growth won’t be far behind and so those thinking of selling are best to do so now before this dip in property values hits.”