Mortgage Approvals in the United Kingdom

Posted by

There have been many changes in the European mortgage market the past few years, and the United Kingdom has had unmeasured success in this avenue. Despite Covid-19 restrictions, this line of business has thrived through a tumultuous time. These events can affect Ireland as well as other European countries.

UK mortgage approvals have reached a near 13 year high, as reported as recently as January 2021. The sudden rise is driven by the government’s stamp duty holiday, and buyers reassessing their living situations during the past year. Numbers that came out from the Bank of England showed large increases in the amount of mortgages approved by banks and building societies. The amount had exceeded 105,000 in February, which had been proven the highest figure since August 2007. This was the month right before queues formed outside branches of Northern Rock, coinciding with the start of the financial crisis. The number of monthly approvals had increased by almost 8,000 in October, which was reflecting a boom in the mortgage market. This aligned with the swift growth in Covid infections, and the second government lockdown.

The borrowing for mortgages nose-dived during the initial lockdown, and the events sank the UK into its deepest recession in over 300 years. Borrowing climbed to around 6 billion pounds in November, which was raised 1 billion higher than the level in October. The amount of new mortgage approvals continued to increase by a larger amount, after a hitting a low point in May. Figures have also shown that households repaid 1.5 billion pounds worth of credit card debt, personal loans, and car finance in November. This reflects consumer spending to be significantly low, because people are able to work from home and save money. Dating back to March, households in Britain have repaid 17 billion pounds of consumer credit. This shakes the trend of rapid credit borrowing the past few years.

Despite positivity stemming from mortgage approvals, many economists think that there will be drop in the coming months. The housing market in the UK was great in 2020 due to living arrangements being adjusted, but mortgage lenders warn that the stamp duty holiday could cause a collapse of housing prices this year. The main mortgage lender in England has estimated a drop between 2 to 5 percent, but economists predict a drop of 8 percent.

Citizens in Europe and the UK need to be aware of market trends to be able to navigate the uncertainty of the new year. It is important to rely on economists and bank brokers to understand how to best handle your money in 2021.