Mortgage Approvals at Lowest Level Seen for Sixteen Months

October 2021 saw the lowest level of mortgage application approvals since the middle of 2020, primarily due to the end of the stamp duty holiday, according to figures released from the Bank of England.

BOE data shows a total of 67,200 home buyer mortgages approved in the month of October, a drop from 71.851, and a significant decrease from 104,547 reported in November last year.

The report also indicated a sharp fall in amounts advanced to buyers during the month, showing a net mortgage lending figure of £1.6 billion, a drop from £9.3 billion recorded in September.

The fall follows months of frenzied property buying, with figures for the year up to September for property sales, reaching £500 billion, largely due to the stamp duty holiday. The tax break led to a rush for buyers to complete before the deadline date at the end of September. The pandemic also changed the priorities of buyers, with many seeking larger properties.

“October’s decrease was driven by borrowing brought forward to September to take advantage of stamp duty land tax relief, before it was completely tapered off,” the Bank of England commented.

October saw an increase in re-mortgaging activity as lenders competed for clients by offering ultra-competitive deals. The month saw a total of 41,642 remortgages approved, up from 32,745 recorded in the same time period in 2020.

The head of residential research at the property firm Savills, Lucian Cook, stated: “There is no great surprise to see a fall in the number of mortgage approvals in October, given the distorting effect of the end of the stamp duty holiday in September.”

His data showed that £513 billion was spent in the UK property market, in the year up to September. This is the first time this figure has exceeded the £500 billion mark and £170 billion higher than pre-pandemic levels.

“That reflected the unusual coming together of three key factors, the so-called race for space as people looked to trade up the housing ladder, the cheap cost of mortgage finance and the added impetus of a stamp duty holiday,” he commented.

“Activity in the more expensive price brackets continues to hold up strongly, so we expect to see a higher than normal spend in 2022, though it’s difficult to see how spending next year can match the extraordinary levels of late across the market as a whole without such a mix of strong drivers.”

Housing analyst and Chief Executive of Twindig, Anthony Codling, commented that he though the BOE’s figures for mortgage approvals are “comforting” and indicated that the property market was moving back to normal levels following the end of the stamp duty holiday.

“At 67,199, mortgage approvals in October were 2.7% ahead of their 10-year average, suggesting that the housing market is a long way away from the cliff edge,” he said.