29 Mar 2021
The extension to the stamp duty holiday in the UK has boosted net mortgage borrowing to a March 2016-high.
This is according to Bank of England findings out on Monday.
Net mortgage lending reached £6.2 billion last month, with mortgage approvals for house purchase hitting 87,700, City AM reports.
According to Coreco managing director, Andrew Montlake the extension to the stamp duty holiday was crucial in driving the rise.
“It’s no surprise net mortgage borrowing hit a five-year high in February, as a large number of stamp duty holiday-fuelled transactions that started last year completed in advance of the deadline.
“Though up on the same month last year, mortgage approvals were understandably lower than the November high as a lot of people, by February, felt they had missed the stamp duty deadline,” he said.
In addition, mortgage approvals with a different lender increased 5% in February from January, to 34,300.
In the meantime, interest rates paid on new mortgages increased six basis points to 1.91% over the same period.
Even though approvals rose higher than in February last year, they have declined from a high of 103,700 in November last year.
Islay Robinson, CEO of Enness Global Mortgages, said that a fall in mortgage approvals “was always on the cards” as the UK neared the end of the stamp duty holiday deadline.
“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.”
Moreover, gross lending to households increased 3.8% month-to-month last month, reports Yahoo News, supporting other indications that GDP rose slightly in February.
However, with many households still hoarding cash, the total value of their liquid assets increased by £15.8 billion, far over the average £4.9 billion rise in 2018 and 2019.
Samuel Tombs, chief UK economist at Pantheon Economics stated: "The rise in high LTV ratio mortgage rates has created a strong incentive for households to use surplus cash to reduce the size of their mortgage in order to drop down to a lower LTV ratio when refinancing.”