2 August 2021

Mortgage lending hits all-time high, thanks to stamp duty holiday

The full impact of the stamp duty holiday was apparent in lending figures for June as buyers rushed to complete their property purchases ahead of the start of the tapering of the stamp duty holiday from the end of that month.

The Bank of England reveals that net mortgage borrowing reached a record high of £17.9 billion in June, compared with the previous record of £11.5bn in March. Approvals for house purchases, an indicator of future borrowing, decreased to 81,300 in June, down from 86,900 in May. This is the lowest since July 2020 although it remains above pre-February 2020 levels and is still relatively strong, suggesting the market is not about to crash as a result of the approaching end of the stamp duty holiday. Remortgage approvals also rose as borrowers took advantage of cheap mortgage rates from sub-1 per cent for two- and five-year fixes.

It is unsurprising that the market remains so buoyant, as borrowers’ minds were focused on the potential tax saving of up to £15,000. Now that the stamp duty concession is being tapered there is still an opportunity to save up to £2,500 if buyers complete before the end of September, so we expect the market to be buoyant for a little longer, if not quite as frenzied as the past few months.

Despite not having the same tax break as before, homeowners’ desire to move for more space both inside and out, with a larger garden and room for a home office or two, remains strong.

The lending market also remains strong and highly competitive on pricing, with some rock-bottom mortgage rates to tempt borrowers. Lenders have plenty of cash to lend and are keen to do so, and there is a greater incentive for borrowers to shop around and refinance. With Halifax the latest lender to cut its two- and five-year fixed rates, there is no sign of this situation changing anytime soon.

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