Yahoo Finance BoE: New UK mortgage commitments fall as stamp duty holiday ends
New mortgage commitments in the UK fell 2% to £77.3bn ($101bn) during the final quarter of last year, compared to the previous quarter, as the government’s stamp duty holiday ended.
According to the Bank of England’s (BoE) mortgage lenders and administrator return (MLAR), this was 11.9% lower than the recent peak of £87.7bn seen a year earlier.
The data also revealed that the outstanding value of all UK residential mortgage loans stood at £1.6tn at the end of the period — 4.7% higher than a year before.
Meanwhile, the value of gross mortgage advances in Q4 was £70.2bn, 8.4% lower than in the same period in 2020. This was the lowest level since the third quarter of 2020.
The quarterly report is aggregated from data on mortgage lending activities provided by around 340 lenders.
Gross mortgage advances refers to the total value of residential mortgage loans advanced by societies in the period, including loans for house purchase, further advances, and remortgages.
September was the final month buyers could benefit from the stamp duty holiday — a tax break designed to prop up the housing market, and help consumers as the economy contracted during the COVID-19 lockdowns.
The holiday was extended from 31 March 2021 to the end of June and once more, tapering from June to the end of September, as people rushed to market.
Housebuyers could have cashed in on savings of up to £15,000 if they bought at the right time.
The break caused a frenzy in the market, with many using it as an excuse to make long-awaited moves or buy for the first time. However, some said that with climbing house prices over the past year the discount was quickly priced in and that it "distorted" the market.
Threadneedle Street also hiked UK interest rates from 0.1% to 0.25% in December, meaning that the share of gross advances with rates less than 2% above bank rate was 71.3%.
The report on Tuesday also revealed that the share of mortgages advanced in the fourth quarter with loan to value (LTV) ratios exceeding 90% came in at 4.2%.
Read more: UK property market records busiest start to the year since 2016
The share for house purchase for owner occupation returned towards pre-coronavirus pandemic levels, at 53.0%, down 10.9 percentage points from Q4 2020.
The share of gross advances for remortgages for owner occupation also moved towards levels observed before the pandemic, at 28.1% — an increase of 9.7 percentage points since 2020.
The value of outstanding balances with arrears decreased by 2.1% over the quarter to £13.5bn in Q4 2021, and now accounts for 0.84% of outstanding mortgage balances, the lowest since recording began in 2007.
The BoE is expected to raise interest rates in March, as well as several times this year, which will affect mortgage lending going forward. It will make its next monetary policy announcement on 17 March.
“We saw a remortage renaissance at the end of last year, as property owners leapt through the window of opportunity to lock in a cheap deal for years before higher rates took hold," Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said.
"Despite the recent rises, mortgage rates are still incredibly low, and with lockdown savings burning a hole in some people’s pockets, there are still compelling reasons to buy.”
