1 September 2020
Encouraging signs of recovery for the mortgage market
The mortgage market continued to improve in July, according to figures released today by the Bank of England, although it remained weak in comparison to pre-Covid levels.
Households borrowed an additional £2.7bn net in July, an increase on the £2.4bn figure borrowed in June. Although this figure was much lower than the average of £4.2bn in the six months to February 2020, July’s figure is an encouraging sign that things are heading in the right direction.
What the figures don’t reflect is the full impact of the stamp duty holiday on purchases of up to £500,000, which was introduced in July. This has given a significant impetus to the market, which we expect to be reflected more fully in August’s transaction figures when they are released.
The number of mortgage approvals for house purchase increased during July, hitting 66,300, up from 39,900 in June when the market was slowly getting back to normal. This figure is 10 per cent below the February level of 73,700 but seven times higher than May’s figure of 9,300. On the remortgage front, mortgage approval numbers remain 30 per cent lower compared with February, standing at 36,000 in July.
Transactions have been taking much longer than normal as lenders try to cope with staff working from home and demand from borrowers. The summer is normally quiet for the market but that has not been the case this year as those who put buying decisions on hold during the Brexit debacle, and then again due to Covid, are now getting on with it. There still seems to be a lot of pent-up demand and we expect the market to be busy into the autumn as the schools go back, providing a return to some normality. However, it remains to be seen what impact the end of the furlough scheme will have and whether this will result in a significant uptick in unemployment, which will impact confidence.
Mortgage rates remain competitive for those with the biggest deposits, while those borrowing up to 90 per cent loan-to-value will find less choice of deal available at higher rates. With transactions taking longer than usual, it makes sense to consult a mortgage broker to advise as to the right product and help steer your application through from start-to-finish.