A rush to secure mortgages before the end of what many thought would be the end of the stamp duty holiday in March has meant mortgage approvals for February were bumped up by 20% from the same month last year.
New data released this morning by the Bank of England shows a slight slowdown from borrowing levels seen in January, however borrowing levels in February were still exceeding those seen before the global Financial Crash in 2008.
"We expect approvals to increase in March 21 following the stamp duty holiday extension announcement in Rishi Sunak’s Budget 2021," said Anthony Codling, CEO of Twindig.
Many analysts pointed to the 10% downturn in February as a temporary blip.
Mortgage approvals in February 2021 were 38% higher than the 10 year average of 63,500.
The stamp duty holiday deadline was extended to September in Rishi Sunak's latest budget, released at the beginning of March.
Ashley Thomas, director of London-based mortgage broker, Magni Finance: "There are more higher loan-to-value products in the market today compared to a month or two back, a sign that lenders are making tentative steps to their pre-Covid offerings.
"We have seen an influx of clients looking to buy second properties outside London. Most have been looking at areas such as the Cotswolds and New Forest, where they can have a holiday retreat and even use it as their primary residence going forward if they are predominantly working from home.
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"We have even seen some clients looking further abroad, such as the South of France. For wealthy clients, they see a lot of opportunity as the cost of borrowing is extremely low if you have a sizeable deposit."
Meanwhile, gross lending to households rose 3.8% month-to-month in February, supporting other signs that GDP increased marginally last month.
In the main, however, households have continued to hoard cash; the total value of their liquid assets — money holdings with banks and in National Savings accounts — rose by £15.8bn, well above the £4.9bn average increase seen in 2018 and 2019.
This takes the total value of households’ "excess savings” to an extraordinary £150bn, equivalent to 7.1% of 2020 GDP.
"The rise in high LTV ratio mortgage rates has created a strong incentive for households to use surplus cash to reduce the size of their mortgage in order to drop down to a lower LTV ratio when refinancing," said Samuel Tombs, chief UK economist at Pantheon Economics.
"Households desire to pay off debt can also be seen in February’s record high level of ad hoc lump sum mortgage repayments. So, while we continue to expect households’ spending to recover quickly, we do not expect it to exceed pre-Covid levels in the next 12 months."
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