Net borrowing in April was at £3.3 billion – a far cry from the record £11.5 billion recorded in March.
However, the BoE revealed, mortgage approvals for house purchases were up slightly in April at 86,900 compared to 83,400 in March. They were still lower than the peak of 103,400 experienced in November 2020.
The BoE’s latest Money and Credit report also revealed approvals for remortgage were ‘broadly unchanged’ at 33,100 – this figure represented remortgaging with a different lender only.
Meanwhile, the effective – or actual – interest rate paid on newly-issued mortgages dipped by seven basis points to 1.88% in April which is just above the 1.85% recorded in January 2020. It compares the BoE’s series low of 1.72% in August 2020.
The report also revealed the rate on the outstanding stock of mortgages remained broadly unchanged at a series low of 2.07%.
The BoE suggested the ‘variability’ in net lending between March and April was a reflection of the stamp duty holiday extension.
And this sentiment was echoed by Charlotte Nixon, mortgage expert at Quilter, who said the rush to secure mortgage deals in March was a result of the stamp duty holiday deadline stampede, which cooled when the chancellor put the date back to 30 June.
Nixon added: “Standing at 1.88%, the effective rate on newly drawn mortgages is pretty low by historical standards which should help with affordability, particularly for first-time buyers.
“But first-time buyer beware. After double digital house price growth, any price correction could send alarm bells ringing if it means the threat of negative equity looms.”
It’s not only the potential negative equity which is causing disquiet as a result of the extraordinary activity in the housing market. There are also concerns over the supply of homes.
Richard Pike, sales and marketing director at Phoebus Software, said: “The ‘Sold’ signs across the country are striking evidence of what can only be described as a booming housing market. House prices are at their highest in seven years, but as demand increases supply is, as always, the problem.
“Housebuilders are desperately trying to play catch-up, following the lockdown restrictions, to meet the government’s targets for new home development.
“However, they now face supply issues of their own with a serious materials shortage caused by the pandemic and, of course, the Suez Canal incident. This is having a serious knock-on effect with developments stalling as a consequence.”
He added: “As ever the fluctuations in the housing market make it difficult to predict what will happen next, but it’s reasonable to expect things to continue in their current vein at least until the end of June. Then we will see how much the stamp duty holiday has driven current activity.”
