6 May 2021

Mortgage lending soars as buyers take advantage of stamp duty tax break

The strength of the runaway housing market is reflected in March’s mortgage lending figures, with the Bank of England reporting the biggest net increase in mortgage lending on record. Borrowing rose by a net £11.8 billion, the strongest increase since records began in 1993, and higher than the peak in October 2006. The desire for more space, fuelled by living with lockdowns, combined with less need to be in the office as much as before, has contributed to a surge in people moving home.

With the stamp duty holiday for England and Northern Ireland originally scheduled to end in March, this deadline focused borrowers’ minds and helps explain the uplift in lending. Since it was extended in the Budget in its current form until the end of June, before tapering off by 30 September, it should mean that demand gradually drops away rather than falls off a cliff.

We expect activity to continue to be brisk over coming months, as the economy seems to be finding a new gear. The Bank of England figures also revealed that consumers are using money saved during lockdown to repay debt, putting them in a stronger financial position. Mortgage rates look set to remain low, while increased availability of high loan-to-value deals should make it easier for first-time buyers to get on the housing ladder.

While there is increasing talk of a housing market ‘bubble’, with Nationwide reporting that the average house price surged by nearly £16,000 over the year to April to hit a new record high, evidence suggests this is not the case. Rising prices are mostly down to lack of stock, with demand outstripping supply. Even if borrowers wished to overstretch themselves to secure a property, lenders’ affordability criteria means it would not be possible for them to do so.

Anyone considering taking out a mortgage to buy in the current market should take advice. With delays still in the system, caused by the sheer volume of transactions, it is worth having a mortgage broker to advise as to the best mortgage for your circumstances, to guide you through the process and to avoid any unnecessary delays. As ever, our mortgage brokers are available to assist you.

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