UK mortgage approvals hit their highest level since 2007 last year, thanks to the stamp duty holiday.
Throughout 2020, the number of mortgage approvals reached 818,500, up from 789,100 the previous year.
The introduction of the stamp duty holiday led to a surge in mortgage applications in the second half of this year, new data from the Bank of England shows. The stamp duty holiday is due to end at the end of next month, which is likely to lead to a cooling in the housing market.
The number of home loan approvals in May 2020 hit a record low of 9,400.
Rais Khalaf, financial analyst at AJ Bell, commented on the data released today: All dials suggest it’s been a great year for British personal finance. Mortgage approvals reached their highest level since 2007, with consumers paying off a record amount of debt, while saving almost £100bn more in cash than last year.
“The reality is that for many people, the pandemic has improved their financial situation thanks to fewer spending options due to lockdown. Of course, that is not the case for everyone, with unemployment at 5% Clearly, economic hardship is also playing a role, as consumer debt is on the rise.However, an overall decline in consumer debt and a pent-up demand for higher levels of cash savings, vacations, dining out, and other leisure activities are contributing. Combined, this could create an explosive powder keg that could boost the economy when it eventually reopens.
“However, there are some warning signs in the data. The fact that mortgage approvals are at their highest level since 2007 is alarming given what happened in 2008. The expiration of the tax holiday will likely take some momentum out of the housing market, and many will see it this way. The good news, especially for those saving for a down payment on a home, is that mortgage financing is much more of a liability now than it was before the financial crisis, which is a sign of the slowdown in the real estate market. This means there should be no systemic problems in the banking sector as a result,” he added.
