The leap in interest builds on an already strong 2020, but some warn there is a risk of a slump later this year when the stamp duty holiday ends.

In some cases, mortgage searches were up by more than 400 per cent between February and March. However, some brokers have described the dramatic rise in interest as “challenging” resource-wise given many of their staff are working from home, coupled with a slowdown in lender and conveyancer speed due to their problems in coping with current working practices.

Pent-up demand

Cherry Mortgage & Finance director Matthew Fleming-Duffy says: “We are currently seeing a significant number of new enquiries.

“Pent-up demand from consumers wishing to move — who say, ‘We need another bedroom/a home office/a bigger garden’ — coupled with the stamp duty holiday incentive has spurred many to engage with property transactions that otherwise may not have taken place for a few years.

“There has been a positive impact from the low-rate mortgage environment and a broadly competitive market, making it attractive to move up the property ladder for many people.”

London & Country director David Hollingworth has a similar view, adding: “Lockdown has made many focus on where they live because we’ve all had to spend more time at home. That is bound to have made some homeowners decide a move is necessary for more space or a home office, with some first-time buyers even more determined to consider their options, or existing owners starting to think about reviewing their rate or extending their home.

“The numbers prepared to move during a pandemic may have been a surprise but the stamp duty holiday maintained that focus and may continue to do so.

“Mortgage rates are also very low, which helps to give borrowers some confidence, especially as we start to consider the light of the vaccine rollout at the end of the lockdown tunnel.”

Numerous mortgage search organisations have also reported a swell in demand over recent months. Price comparison website Moneysupermarket.com says mortgage enquiries were up by 421 per cent in the first week of March — when the stamp duty holiday extension was confirmed — compared to the first week of February. This was mainly driven by FTB searches, and 90 per cent loan-to-value mortgages made up 39 per cent of the site’s enquiries. In the first week of February they made up just 20 per cent of enquiries.

Mortgage software firm Twenty7Tec reported 1.25 million mortgage searches in February, up from 1.21 million in January. To put that into context, there were just 1.1 million searches in November while the quieter December period accounted for 761,000.

The firm’s sales director, Phil Bailey, says: “January volumes were unseasonably high and yet February 2021 still out-performed the previous month, despite having fewer days.”

Property transaction and mortgage approval data shows the housing market has been growing since it reopened in mid-May after the first lockdown. However, it is probably too early to tell if the 2021 demand that has been reported by brokers and search websites has translated into completions; it can take weeks or months between an initial enquiry and purchase or mortgage approval. Plus there is the lag in reporting the data itself.

Figures from HM Revenue & Customs show there were 147,000 UK residential transactions in February, the most it has reported since March 2016. However, that may reflect the rush to beat the stamp duty holiday from buyers who actually began their search many months ago, when the original deadline was the end of March.

The most recent Bank of England figures at the time of writing showed 99,000 mortgage approvals for home purchases in January, down slightly from 102,800 in December. However, the number had been growing throughout 2020 and the year as a whole had the highest number of approvals since 2007.

Deceptive enquiries

However, some warn that an increase in enquiries does not always translate into a similar amount of new business.

Trinity Financial product and communications director Aaron Strutt says: “A high percentage of people visiting websites or calling are not going to take a mortgage or buy a property. This may be because they do not qualify due to an insufficient income or deposit, or they are not ready to buy. People are often just looking for advice to work out how they can get on or move up the property ladder.”

Another reason for the more recent increased demand is the return of high-LTV mortgages, and some brokers think this could further stimulate interest in the coming months.

Figures from data provider Moneyfacts show there were 323 products at 90 per cent LTV in March compared to 248 in February, 160 in January and just 62 in September. The number of 95 per cent LTV mortgages was still low at just 5 in March, which was down from 391 a year earlier.

However, news in the Budget last month of a government guarantee scheme to support 95 per cent LTV mortgages will undoubtedly bring more to the market.

In fact, shortly after the chancellor’s announcement, Accord claimed to be the first lender to return to 5 per cent deposit lending in England, Scotland or Wales — where it is not tied to any special schemes nor limited by geography.

“Demand is likely only to be enhanced with the return of a more functional higher-LTV market,” says Hollingworth.

“The Budget announcement of the mortgage guarantee will not only stimulate more 95 per cent rates but also act as a clear statement that this market will be open.”

Despite the increase in demand for property purchases in 2020 and into 2021, it has been a different story with remortgages. For much of 2018 and 2019, Bank of England data showed monthly remortgage approvals in the 40,000s, but since the pandemic they have been largely in the 30,000s.

Many put this down to the financial impact of Covid-19 with a lot of borrowers not qualifying for a new loan due to the mix of tighter criteria, depressed income and the fact so many are on mortgage payment holidays.

Bailey says: “Remortgage figures will remain a little depressed because of the ongoing mortgage payment deferral scheme.”

Unexpected taper

Looking further ahead, there are fears that demand for home purchases could slump once the stamp duty holiday ends.

The scheme, where the tax is waived on primary homes worth up to £500,000, was due to end on 31 March. However, it was announced in the Budget that the holiday would be extended in its current form to 30 June, which many had anticipated.

Afterwards, the standard FTB threshold of £300,000 will return, but what took many by surprise in that announcement was that there would also be a three-month period from July to September where no tax would be charged for non-FTBs on the first £250,000 of a primary residential property. From October, the standard £125,000 threshold will be reintroduced.

Enness Global Mortgages chief executive Islay Robinson says: “Activity is far higher than normal and this has been driven by the stamp duty holiday. This frenzy looks likely to continue until summer but the question for sellers, estate agents and mortgage brokers is: what happens once the levy is reinstated?

“We may be about to take a step back from the cliff edge with the stamp duty holiday extended. However, this is only prolonging the inevitable and, if anything, will just steepen the gradient of any potential market decline.”

Although some expect a drop-off in mortgage demand in the second half of the year, the return of high-LTV lending could alleviate some of that reduction, it is claimed.

Fleming-Duffy explains: “I’d expect to see a natural drop-off in the number of enquiries and transactions once the stamp duty holiday ends. But, as the lockdown eases, I believe transaction levels will not plummet as some have predicted.

“We still have an issue with the under-supply of housing so, with future government intervention — such as support for 95 per cent LTV mortgages — I feel the property market will continue to thrive.”

Although demand is strong, many brokers report delays in clients getting accepted, which indicates the supply chain is struggling to cope.

Trussle head of mortgages Miles Robinson says: “Lenders are dealing with the sheer scale of demand we’ve seen over the past year.

“However, other stages of the housebuying process aren’t moving as quickly. Conveyancers and surveyors are facing extreme delays. Waiting times for land searches in certain areas of the country are very long due to a backlog of cases. This means that time to complete on a property in the UK now takes on average 163 days.”

Fleming-Duffy adds: “Banks, building societies, surveyors and solicitors all have people working from home, and some may be self-isolating or possibly unable to work.

“I recently spoke with a bank call-centre operative who was sat on his bed with a laptop and a headset because his partner had commandeered the lounge. We were discussing a tricky case that he needed to refer to another of his colleagues before answering. That took two days.

“We are frequently seeing lender employees switch off their phones and respond only via email, which can take up to five working days.”

Common theme

Brokers too are having problems handling the demand, although of course few will be complaining at a time when many businesses have suffered a dramatic slump in their income.

The experiences for large and small firms are diverse because the way they call on resources may be different, but a common theme is the challenge of trying to deal with much more business while many of their staff are working from home.

Hollingworth says: “The level of demand has been extremely challenging in the past 12 months, especially given the move to remote working and the shifting processing capability and criteria of lenders.

“It’s been important to work on communicating that as best we can, and setting the right expectation throughout the customer journey, whether that’s longer processing times or the impact of the stamp duty holiday.

“We’ve also continued to recruit to meet the demand and ultimately grow the business.”

L&C is a major nationwide broker but the demands at a local level can tell a more personal story, especially for smaller broker firms.

Fleming-Duffy says: “As the owner of a small business, I find it very hard to turn away business and I frequently work 12 hours per day with only 20 minutes for lunch. I work through the weekends, catching up with paperwork.

“I guess, like many people, my life feels as though it’s all work and no play at the moment.”