In 2020 UK mortgage approvals reached a record high

David Banks
Authored by David Banks
Posted Sunday, March 14, 2021 - 11:11pm

The number of mortgage approvals reached their highest levels since 2007—seeing buyers take advantage of the stamp duty holiday. This shows that despite the lockdowns and overall volatility of the previous year, the housing market remained resilient. 

Throughout 2020, there were 818,500 mortgage approvals. That number is up from 2019 which saw 789,100, as reported by the data released recently by the Bank of England.

May saw a record low of approvals, totaling only 9,400. The second half of the year experienced a drastic increase in lending. The stamp duty holiday introduced in the summer had buyers rushing to take advantage of the new implementation.

In December, approvals fell back to 103,400, down from 105,300 in November, but still reaching the highest level since August 2007.

“While these figures are always a good indicator of direction of travel for the market, we won’t be getting carried away,” said Jeremy Leaf, former RICS residential chairman. “Not least because the year’s lower for these approvals appeared a couple of months after the first lockdown.”

As the stamp duty holiday comes to a close at the end of March, it’s unlikely that this momentum will be sustained. Patheon’s chief UK economist believes the vaccine rollout will also mean that, by the summer, people will be content again with their pre-pandemic housing choices. 

Due to limited spending options during the lockdown, consumers paid down a record £16.6bn in debit in 2020, reported by the BoE’s data.

AJ Bell financial analyst Laith Khalaf believes that an overall reduction in consumer deft, combined with high levels of cash savings, and building demand for holidays, meals out, and other leisure activities, could potentially be an explosive powder keg that could help drive the economy when it opens up again.

“You wouldn’t guess there was a devastating international crisis in 2020 simply by looking at consumer banking activity. All the dials suggest it was a great year for personal finances in the UK. Mortgage approvals were at their highest level since 2007, consumers paid down a record amount of debt, and at the same time saved almost £100 billion more in cash than last year,” said Khalaf.

Khalaf believes that many people have seen their financial positions improve during the pandemic, thanks in part to spending options being decimated by the lockdown. Although he doesn’t believe it’s a universal case, and with unemployment at 5% and looking to increase, there are financial troubles in the mix for some.

“There are some warning signs in the data too though. The fact mortgage approvals are at their highest level since 2007 sets alarm bells ringing given what happened in 2008. The expiry of the stamp duty holiday at the end of March will likely take some steam out of the housing market, and many would view that as a positive thing, particularly those saving for a house deposit,” Khalaf said.

He sees mortgage lending as a sign of good news and believes it’s more responsible today than before the financial crisis.

And for those who did not see their financial positions improve during the pandemic, there are still options available. Services like 1st UK online, for example, can help customers with low credit scores find favorable mortgage deals, which allows those who had their credit scores harmed by the pandemic to still be able to get an affordable mortgage.


 

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