The latest Bank of England statistics show that borrowers repaid £1.4bn of mortgage debt on net in July following record net borrowing of £17.7bn in June.

Mortgage approvals for house purchases fell to 75,200, down from 80,300 in June.

The Bank of England (BoE) Money and Credit survey pointed out that consumers had not borrowed additional credit, on net, and that the effective rate on new personal loans remained at 5.85% — significantly higher than the super-cheap sub-1% mortgages in the news.

The effective rate on interest-charging overdrafts decreased by 34 basis points in July, to 20.35%, while the cost of credit card borrowing was 17.7%, having varied between 17.5% and 18.5% since March 2020.

More people are paying off mortgage debt while they can

Large businesses borrowed £4.5bn from banks, while small and medium-sized firms repaid £1.2bn. Private non-financial companies raised no additional net finance from capital markets, compared to a monthly average net issuance of £3bn since March 2020.

Why are people making mortgage overpayments now? Net repayments are relatively rare, with only one other occurrence in the past decade. However, with fewer people commuting or going on expensive holidays, and pitifully low savings rates, more people are paying off mortgage debt while they have the chance.

Why are approvals down? There’s the end of the stamp duty holiday, plus the shortage of suitable and affordable property for many buyers and sellers. Even with approvals down, most brokers will be feeling pretty buoyant with lenders going full reversal on lending criteria from when the pandemic hit. Many estate agents are still busy taking offers over the asking price, and still going to sealed bids.

The BoE will be keen to report further positive figures

Thankfully, low deposit rates are getting cheaper and banks and building societies are pushing to make their mortgages easier to qualify for. There is still a huge demand for properties and first-time buyers are as keen as ever to get on the property ladder.

Approvals for remortgage (which only capture remortgaging with a different lender) rose to 37,400 in July, from 35,800 in June. This remains low compared to the months leading to February 2020.

It is a shame UK Finance has stopped publishing product transfer data because I suspect the numbers would be huge. In the last data released, 1,195,200 homeowners switched product with their existing provider during 2019, representing £167.4bn of mortgage borrowing. In the final quarter of 2019, there were 309,300 product transfers. Of these, 166,700 were advised and 142,600 were execution-only.

Stock shortage

The UK’s population is reported to be 68,301,245. With a shortage of homes, there is always going to be demand.

According to research from Zoopla, we are in the midst of the “greatest stock shortage since 2015” as the number of properties for sale in June dropped by 26.4% compared with the 2020 average. The firm reports buyer demand is over 20% above the 2020 average and supply shortages “are expected to run until 2022”.

Banks and building societies are pushing to make their mortgages easier to qualify for

Nationwide Building Society also highlighted that UK house prices rose by almost £5,000 in August as the property market continued to boom after the partial end to the government’s stamp duty holiday in England and Northern Ireland.

The BoE will be keen to report further positive figures over the coming months. Its staff will also hope to have more suitable neighbours. The Evening Standard reports that a bar next to the Bank was raided and police found a £1m cannabis factory.