Mortgage borrowing surged to an all-time high in March, official data showed on Tuesday, as the UK property market continued to boom.
According to the Bank of England’s latest Money and Credit report, net mortgage borrowing reached £11.8bn in March 2021, the strongest since the series began in April 1993 and higher than the previous record of £10.4bn, seen in October 2006. It was also a significant jump on February’s figure of £6.2bn.
However, there were 82,700 mortgage approvals for house purchase in March, down from 87,400 in February and below consensus expectations of 86,500.
It was also a significant slide on November’s peak of 103,100, though the figure was ahead of the 73,000 approvals recorded in February 2020.
The housing market has boomed following the introduction last summer of the temporary stamp duty holiday. It had started to show signs of slowing as the end of the tax break – originally slated for 30 March 2021 – neared. But in a surprise move, the chancellor announced in his 3 March budget that it would be extended. The threshold, currently at £500,000, will now be cut to £250,000 at the end of June before returning to its normal level of £125,000 at the end of September.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The decline in house purchase mortgage approvals can be attributed to expectations before the budget that the threshold for stamp duty would return to £125,000 at the end of March. Very few people applying for a loan in March would have been able to complete their transaction before the end of the month.
“The chancellor’s decision in the March budget to maintain [the holiday] clearly has reignited the housing market.
“Approvals plausibly could surpass November’s recent peak of 103,000 at some point in the second quarter.”
Laith Khalaf, financial analyst at AJ Bell, said: “Low interest rates, the stamp duty holiday and a paradigm shift in homeworking are collectively proving a heady cocktail for the property market. Consumers are looking to make the most of favourable financial conditions to climb the housing ladder.
“The extension of the stamp duty holiday…will clearly keep the housing market bubbling away for the next few months.
“But while that is clearly good for borrowers today, should interest rates rise, payments will get less affordable as fixed term deals expire.”
The Money and Credit report also showed that people were continuing to pay down personal debt and boost savings. A total of £0.5bn of net repayments of consumer credit was made in March, while an additional £16.2bn was deposited by households.
With spending opportunities curtailed by lockdowns, since March 2020 individuals have made significant repayments of consumer credit. March 2021’s figure of £0.5bn, however, was below the monthly average seen in the last year, of £1.9bn.