£6bn handed out in a month as home loans soar to five-year high
LOCKDOWN homebuyers pushed mortgage borrowing to its highest level in five years, the Bank of England said yesterday.
Home loans totalling £6.2billion were handed out in February.
That was the highest figure since March 2016 – and experts reckon it was fuelled by the stamp duty holiday extension and the success of the vaccine.
Jeremy Leaf, north London estate agent and former residential chairman of the Royal Institution of Chartered Surveyors, said: “Since the stamp duty deadline was extended and vaccination rollout has taken off, the market has gained new impetus.”
Approvals for house purchases were 87,700, higher than at the start of the pandemic in February 2020. The figure edged down from 97,350 in January.
Chancellor Rishi Sunak has said the stamp duty tax relief will finish at the end of June.
The fallout from lockdown also saw a slump in credit card spending in February contribute to the biggest fall in consumer borrowing in 27 years.
And in a sign of household caution, people continued to deposit significant amounts into savings and investments accounts.
Despite the returns on savings at a record low, with the Bank of England base rate set at 0.1 per cent, savers added an additional £17.1billion to their rainy-day funds in February, said the Money and Credit report.
Nitesh Patel, strategic economist at Yorkshire Building Society, said: “The market has been on an upward trajectory, despite rising house prices and continued economic uncertainty, with buyers not deterred from buying the biggest ticket item of them all. There is growing evidence that larger homes are currently the most desirable – since March 2020, sales of detached homes have grown from 22 per cent to 28 per cent of all transactions.
“Flats now account for a smaller share at 12 per cent, down from 17 per cent over the same period.”
Thrifty households paid back credit cards, personal loans and overdrafts at the strongest annual rate since 1994 in February, the Bank’s figures show.
With people paying back more than they borrowed, consumer credit borrowing fell by 9.9 per cent annually – marking a new low since records started in 1994. Within the total, credit card borrowing shrank by 21 per cent over the year, also marking a new low, the report said.
During the four weeks of February, consumers made a total debt repayment of £1.2billion – only slightly smaller than the average of £1.8billion made since March last year.
Howard Archer, chief economic adviser to forecasting group EY Item Club, said: “The overall slowdown in consumer credit growth had originally been significantly affected by weaker private car sales, which reduced demand for car finance.
“February’s figures are within scope of the third national lockdown, which is limiting consumer activity.
“Retail sales volumes were down 3.7 per cent year on year in February, while private new car sales declined 37.3 per cent.”