British mortgage approvals in September dipped to their lowest level since July last year, when a temporary stamp duty holiday was first unveiled, the Bank of England said on Friday.
There were 72,600 approvals for house purchases in September, a dip on the 74,453 figure seen in August. In July, 75,100 mortgages were approved.
However, lending rose to £9.5 billion last month – the highest level since June when buyers were rushing to complete deals before the tax deadline was scaled back.
The amount is above the £6.8bn average over the past six months, reflecting another boost to the market before the stamp duty holiday was fully wound down on September 30.
The BoE said September’s increase in the value of mortgage borrowing was driven by “the complete tapering off of lower stamp duty from October”.
“The net borrowing in September was £2.9bn above the 12-month average to June 2021, when the full stamp duty holiday was in effect,” the BoE said.
“Approvals for remortgaging (which only capture remortgaging with a different lender) rose slightly to 41,500 in September. This remains low compared to the months running up to February 2020, but is the highest since March 2020.”
Mortgage approvals – an indicator of future borrowing – are still above their pre-February 2020 levels, but demand may change now that the tax break has fully ended.
The stamp duty holiday in England and Northern Ireland was tapered from July, reducing the potential savings that could be made.
Under the tax incentive scheme, the first £500,000 of any property purchase in England or Northern Ireland was exempt from stamp duty until the end of June. Similar measures were offered in Scotland and Wales. This was tapered down to a £250,000 tax-free allowance until the perk ended completely on October 1.
The stamp duty holiday helped to push prices up by 8.5 per cent last year despite the wider economy being hammered by the fallout from Covid-19, but it was not the only factor driving the increase in prices.
The housing market was also supported by the work-from-home trend as buyers went on the hunt for larger homes with more space and gardens, as well as low mortgage rates.
In September, rates dropped to 1.78 per cent for newly drawn mortgages and to 2 per cent on the outstanding stock of mortgages, the lowest on record, however this is all set to change.
Mortgage rates are expected to rise next week as the BoE strives to contain rising inflation.
bans, said there is a “high chance” the BoE will raise interest rates to 0.25 per cent at next week’s meeting, from 0.10 per cent.
“It may then raise rates to 0.50 per cent in February, if not in December,” he added.
Meanwhile, consumers reined in spending as the country’s darkening economic outlook and rising prices hit confidence.
Consumers borrowed an extra £200m, with credit card lending up almost £600m, marking the strongest level of net borrowing since July 2020.
This remained below the pre-pandemic average borrowing, the BoE said, with the annual growth rate for all consumer credit remaining weak.
The amount being saved by households was also up, with £9.4bn deposited with banks and building societies in September – compared to an average of £8.9 billion between April and August.
Individuals also repaid £400 million in personal loans and credit – the first net repayment since February this year.