E Economics

U.K. Mortgage Approvals Reached The Highest Since August 2007

04 January, 2021
U.K. Mortgage Approvals




 

U.K. mortgage approvals reached the highest since August 2007. Date from the Bank of England showed the number of U.K. mortgage approvals by banks and building societies for home purchases jumped to 105k in November 2020 (up from 98.34k prior). It was the 6th straight rise and it confirmed the boom in the housing market.

 

U.K. Mortgage Approvals

 

The rebound can be mainly explained by the government’s stamp duty holiday introduced in July 2020. It allows buyers to save as much as £15,000, if they are buying a property of £500,000 or more. It was designated to help housing recovery after mortgage approvals collapsed during the first half of 2020, reaching 9.35k in May 2020 (the lowest level since figures are recorded).

 

In the meantime, buyers also benefited from record-low mortgage rates in 2020 (the same pattern was observed in the U.S.) as the BOE cut twice its key interest rate (from 0.75%) since the onset of the pandemic in March. The two factors pushed housing prices higher. In November, they increased by 6.5 percent compared to a year ago (the sharpest rise for nearly six years) according to Nationwide.
 

However, focusing on mortgage approvals, the trend doesn’t look sustainable with the tax break expiring in March 2021 and the prospect of tighter restrictions amid Covid-19 resurgence.