Mortgage approvals reach highest levels since 2007
Martin Blake-Symes • January 5, 2021
The scramble for property continues as buyers rush to take advantage of the stamp duty holiday
Adapted from a Zoopla article by Nicky Burridge
Mortgage approvals soared to a new 13-year high in November as the property market showed no signs of slowing down. A total of 105,000 mortgages were agreed for people purchasing a home, the highest level since August 2007, according to the Bank of England.
Approvals were up from 98,300 in October (also a 13-year high) and broke through the 100,000 barrier for the first time in 13 years. The increase comes as lenders continue to expand on the number of mortgages available for first-time buyers.
There are currently 160 different deals available for people with a 10% deposit, up from a low of 51 in October last year, but still significantly below the 762 that were available in January 2020, according to the latest figures from Moneyfacts.
Why is this happening?
The buoyant mortgage approval figures suggest the mini boom in the housing market still has further to run. The high level of transactions has been sparked by a combination of the stamp duty holiday on homes costing up to £500,000, alongside people re-evaluating their housing needs following lockdowns and periods of working from home.
Meanwhile, the rise in mortgage products for buyers with small deposits indicates lenders are feeling less risk-averse than they were in the early days of the coronavirus pandemic, when many of these deals were taken off the market.
Who does it affect?
The increase in mortgages for people borrowing 90% of their home’s value is good news for first-time buyers. But while the availability of these mortgages has increased, there are still very few options for people with only a 5% deposit, with just eight different 95% mortgages currently available.
Although product choice for people with a 10% deposit has increased, the cost of the deals remains significantly higher than this time last year. The average interest rate is now 3.65% for a two-year fixed rate mortgage, compared with 2.59% a year earlier, despite the Bank of England base rate falling by 0.65% during the period.
Mortgage rates are even higher for people with just a 5% deposit, averaging 4.44% on a two-year fixed rate loan, up from 3.25% in January 2020.
What’s the background?
Zoopla data suggests the current mini housing market boom still has further to run. Buyer demand was 33% higher in December than it was in the same month of 2019, according to Zoopla’s latest House Price Index. Meanwhile, a record Boxing Day bounce saw traffic on Zoopla’s property search portal surge by 70.5%, considerably higher than the 61% jump seen a year earlier.
But the market is expected to start slowing down in the second quarter of this year once the stamp duty holiday ends on March 31 and unemployment rises as government support measures are withdrawn.
Top three takeaways
- Mortgage approvals for house purchases soared to a new 13-year high in November as the property market showed no signs of slowing down
- A total of 105,000 mortgages were agreed for people purchasing a property, the highest level since August 2007
- The number of mortgages available to people with a 10% deposit has increased to 160 from a low of 51 in October last year.
All measures of sales market activity continue to improve as pent-up demand returns to the housing market. Buyer demand is 11% higher than a year ago. A better indicator of market health is sales agreed which are 15% higher than a year ago – evidence of greater buyer confidence and more realism on pricing by sellers. The North East (+17%) and London (+16%) have led the rebound in sales.
Sales hold up in Q4 2023, providing support for prices
The final weeks of 2023 have recorded above average levels of new sales, 17% higher than a year ago and ahead of 2019 levels. Market sentiment is improving due to rising incomes and an initial decline in mortgage rates. An increase in available supply, up a quarter on last year, is also boosting choice and supporting sales.
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