Mortgage approvals ticked lower in August as demand continued to ease from the highs seen during the stamp duty holiday, official data showed on Wednesday.
According to the latest money and credit report from the Bank of England, there were 74,500 mortgage approvals for house purchase in August. That was down on July’s 75,100 and the lowest since July 2020. It was, however, above consensus, with most analysts looking for 73,000, and remains above pre-pandemic levels.
Individuals borrowed net £5.3bn of mortgage debt in August, following a net repayment in July of £1.8bn. The amount borrowed was £1.4bn below the 12-month average to June 2021, when the full stamp duty holiday was in full effect.
Away from home loans, and consumers borrowed an additional £0.4bn in consumer credit. That was above its prior six-month average and in line with consensus.
Households continued to save as well, depositing an additional £9.1bn into bank and building society accounts in August, compared to an average net flow of £8.5bn between April and July 2021. It is also well above pre-pandemic levels; in the year to February 2020 the average inflow was £4.7bn.
Laura Suter, head of personal finance at AJ Bell, said: “Some of the heat is coming out of the housing market after a pandemic-fuelled drive for space and the stamp duty cut put the rockets are the market.
“The nation’s frugal lockdown saving ways have not been dented by being able to go out and spend more, with us all savings £9.1bn in August, almost double the usual savings amount we saw pre-pandemic.”
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “Mortgage approvals remained comfortably above the 2015-to-2019 average, of 66,400, in August, but they remain on course to fall further in the fourth quarter. Leading indicators of demand have continued to soften.
“In addition, housing market activity typically has been subdued when CPI inflation has been high, due to the strain it places on households’ budgets. While some households likely will use their savings to put down a deposit on a home, we expect falling real incomes to ensure that both housing market activity and house price growth are subdued in the first half of 2022.”
Martin Beck, senior economic advisor to the EY Item Club, said: “Secured lending data remains heavily influenced by the stamp duty holiday. July saw a rare net repayment of mortgage lending as a result of accelerated purchases to take advantage of the higher threshold for paying stamp duty. But net lending rebounded in August, which is some way above the levels typically seen before the stamp duty cut was introduced.
“Overall, mortgage approvals continue to fall. And with the stamp duty threshold set to revert to its normal level of £125,000 from 1 October, [we] expect demand to continue to soften, although there could be another rise in net lending in September as buyers again race to complete before the tax cut ends.”