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UK mortgage approvals fall as stamp duty holiday frenzy ends

·3-min read
UK house prices
A row of houses in Elgin Crescent, in Notting Hill, London. Photo: Matt Crossick/ EMPICS Entertainment.

August saw both a bump in UK mortgage borrowing, and a fall in approval rates, as homebuyers digest the impact of the end of the stamp duty holiday. 

Individuals took on £5.3bn ($7.2bn) in mortgage debt in August, following a rare bout of repayments in July, which saw £1.8bn added back into coffers. 

The Bank of England said net borrowing in August was £1.4bn below the 12-month average to June 2021, when the full stamp duty holiday was in effect. 

Gross lending bounced back to £21.5bn in August, from £16.6bn in July. Gross repayments fell a little to £17.6bn.

However, approvals for house purchases, an indicator of future borrowing, ticked down in August to 74,500 from 75,100 in July. 

This is the lowest since July 2020, but remains above pre-February 2020 levels. 

Approvals for remortgaging (which only capture remortgaging with a different lender) rose to 39,700 in August. This remains low compared to the months running up to February 2020, but is the highest since March 2020.

The ‘effective’ interest rates – the actual interest rates paid – on newly drawn mortgages ticked down one basis point to 1.82% in August. That is a little below the rate in January 2020 (1.85%) and the series average since March 2020 (1.83%). 

The rate on the outstanding stock of mortgages stayed at a series low of 2.05%.

"August and September were certainly quieter on the applications front, but it feels busy as I'm fighting cases through with some lenders, who are more cautious than ever, especially with the self-employed," said Scott Taylor-Barr of Shropshire-based Carl Summers Financial Services.

"I have certainly seen a rise in the number and value of down-valuations recently, with more surveyors disagreeing with the prices people seem to be offering for property."

Read more: UK house prices hit record high yet again

The news comes following Zoopla's house price index, released on Tuesday, which showed that UK house prices have hit another record high, with average annual house price growth increasing by 6.1% in August — over double the rate of growth compared to a year before.

While the stamp duty holiday for England and Northern Ireland, introduced in response to the COVID-19 pandemic, will come to an end following the tapered period at the end of September, demand and activity is going strong.

With the time between listing a property and agreeing a sale consistently averaging under 30 days each month since May, the market is moving at its fastest pace for the past five years. The time taken to sell would usually clock in above 40 days at this time of year, according to Zoopla.

Read more: Hospitality labour crunch continues as low-paid risk being priced out of UK tourist hotspots

Buyer demand is also 35% higher than average levels recorded over the last five years, according to Zoopla. 

Watch: How much money do I need to buy a house?

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