According to the BoE’s Money and Credit report, secured borrowing was an additional £4.3 billion in October and is a far cry from the £0.2 billion experienced in April. Indeed, the recovery is so significant it tops the average £3.9 billion in the six months to February 2020.
While the £4.3 billion is not quite as high as the £4.9 billion experienced in September, mortgage approvals did continue on an upward trajectory.
Today’s BoE figures showed approvals for house purchases went up to 97,500 in October from 92,100 in September – the highest number since September 2007, 33% more than in February 2020 and 10 times higher than when figures plummeted in May.
When it came to remortgaging, the numbers only referred to switches to new lenders. However, the approvals were unchanged in October at 32,900 – this was 40% lower than in February.
Rate increases
While approvals were soaring to new heights, rates were also heading upwards. The BoE data reported the ‘effective’ interest rates – the actual interest paid – on newly drawn mortgages was up by four basis points to 1.78%.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “With mortgages approvals at their highest level since September 2007, the market continues to be robust.
“But the circumstances are very different to 2007; back then, those highs were followed by the credit crunch but this time around there is far more scrutiny on mortgage underwriting and the assessment of affordability. This, combined with historic low interest rates, mean we should not see a repeat of that crisis.”
Harris said the increasing availability of 90% LTV mortgages in recent days – with firms such as Accord, Yorkshire Building Society and Atom re-entering this space – was also good news for borrowers.
“This should help bring down rates on high LTVs, making those deals more accessible, and further boosting the market,” he added.
Economist’s view
Meanwhile, Nitesh Patel, strategic economist for Yorkshire Building Society, said: “The housing market continues to defy economic logic, despite challenging economic conditions caused by the global Covid-19 pandemic and uncertainty over the UK’s trading deal with the EU.
He added: “Pent-up demand from the lockdown has been driven by buyers looking for bigger homes that accommodate home working and more garden space, as well as the Stamp Duty cut may have drawn in opportunistic buyers who were previously discouraged by high transaction costs.
“There is good reason to believe that homeowners with large amounts of equity in their homes are the most active, with first-time buyers making up a smaller proportion of approvals.
“These are temporary factors, particularly the Stamp Duty cut which, as it currently stands, ends on 31 March next year.
“With the economy set to remain weak and unemployment likely to rise when the job support scheme comes to an end, we should see housing activity start to decline in the second quarter of 2021.”
