The UK housing market’s return to strength following the initial COVID-19 lockdown exceeded all analyst and economist expectations. That is according to the latest figures from Nationwide, which indicate that more than 100,000 mortgages were approved by lenders in November alone.
This would make November the busiest month for mortgage approvals in the UK for more than 13 years.
House price growth due to the temporary suspension of the real estate market is credited with much of the elevated activity towards the end of the year. The same can also be said for the temporary stamp duty holiday, which is set to expire on March 31.
During the last three months of the year, there was a flurry of interest among prospective buyers looking to make the most of the stamp duty break before the deadline.
Banks are struggling to cope with demand
Even at a time when the employment situation in the UK was looking worse than it had in decades, record numbers of people were applying for mortgages and setting their sights on property ownership, with many using UK mortgage calculators to find out the costs much more accurately. This surge in interest had a knock-on effect on average house prices, which spiked an impressive 7.3% during December alone. However, experts are warning that those who have yet to set their plans to take advantage of the stamp duty holiday may have already run out of time. Particularly where banks and lenders are offering high LTV loans with minimal deposit requirements, there is still a major backlog of applications that many are struggling to cope with.
“The good news is that the banks are increasingly eager to lend, and we have started to see major institutions return to lending to buyers with small deposits, in a boost for first-time buyers,” said a partner at Knight Frank Finance.
“The bad news is that many banks still haven’t worked through a backlog of applications that built up during the lockdown and subsequent surge in activity during 2020 and will likely struggle to cope if activity picks up during the first months of this year.”
A rapid slowdown is predicted
Accelerating house prices and the March 31 deadline of the government’s stamp duty holiday will inevitably impact demand and general housing market activity going forward; however, it is now likely that the economic impact of the third national lockdown, imposed as of January 5, 2020, could influence the housing market. The rate at which transactions are delayed, suspended, or cancelled altogether remains to be seen, though at this stage, what is troubling many of those operating within the industry most is the prospect of the new lockdown continuing until March or even later.