The number of mortgage approvals for house purchase in August increased sharply to 84,700 the highest level since October 2007, according to Bank of England figures.

The number was up nearly 30 per cent month on month and 15 per cent higher than February’s figure of 73,700 before the pandemic hit.

However, it only partially offsets weakness seen between March and June. For the year to date, there have been 418,000 approvals in 2020, compared with 524,000 over the same period in 2019. 

Approvals for remortgage, which do not include product transfers, are little changed compared to July, at 33,400 and 36 per cent lower than in February 2020.

Net mortgage borrowing was £3.1bn similar to July’s figure of £2.9bn. 

Effective mortgage interest rates were broadly unchanged.

Mortgage borrowing hit a trough of £0.5bn in April, and is still slightly lower than the average of £4.2bn in the six months to February 2020. The increase on the month reflected slightly higher gross borrowing of £18.8bn, although it is still below the pre-Covid February level of £23.7bn.

Keystone Property Finance chief executive David Whittaker says: “There were no signs of the traditional summer slump this August, with the mortgage market experiencing a ‘mini boom’ and showing positive signs of recovery following an extremely challenging period. 

“Within the buy-to-let market, falling rates, pent up demand and the stamp duty holiday have no doubt acted as an incentive for landlords and investors to take this opportunity to diversify their property portfolios.

“However, whilst today’s figures give us reason to be cautiously optimistic about the market, a raft of regulatory changes coming into force this year means buy-to-let investors must continue to seek the advice of brokers who can help them navigate this complex landscape.”

Bluestone Mortgages managing director Steve Seal says: “It is reassuring to see small signs of recovery across the industry, as mortgage lending picks up and consumer confidence gradually returns. 

“Lenders and advisers are working together to ensure that, for customers who can progress with home purchases, the support they need is available.

“However, while this may be the case over the short-term, the long-term picture will present the market with another challenge – supporting those who have been significantly impacted by the Covid-19 crisis. 

“For the thousands of borrowers who have been made redundant or furloughed, for example, their financial position will be more precarious than it was before the pandemic hit. 

“This has the potential to damage their future lending prospects and leave them locked out of mainstream lending channels.

“Looking ahead to a post–coronavirus future, there will be several opportunities for the specialist market to grow to support these borrowers. “Specialist lenders will be essential to the recovery of the sector, providing individuals in more vulnerable situations with the financial lifeline they need.”

Private Finance director Shaun Church also expresses caution over how to interpret the apparent bounceback in activity.

He says: “This latest data shows the size of the steep rise in demand in the housing market as a wave of buyers scrambled to secure cheap financing to push through property purchases.

“The sharp rise in mortgage approvals is likely being driven by high levels of buyers pouring into the market following the initial lifting of lockdown restrictions. 

“Activity levels are being stimulated by prospective homeowners bringing purchases forward by one, two and five years to take advantage of the financial benefits on offer through the stamp duty holiday.

“Changing consumer preferences have also fed into high demand levels. People are placing greater value on larger properties with access to green space, causing them to relocate to properties that better align with these new requirements. 

“These have all compounded to create an artificial environment making it appear as if the housing market is in a robust position.

“However, the market is looking increasingly fragile. 

“Economic headwinds are rapidly intensifying, driven by the growing likelihood of the reimposition of a national lockdown. 

“This will reduce consumer confidence, causing people to adopt a cautious spending approach and avoid making big ticket purchases until they have greater certainty over their financial future.”