Banks may not be able to cope with mortgage demand, warns agency

New figures from the Bank of England show that mortgage approvals rose 7.0 per cent in November to reach 105,000 - the highest number for over 13 years as the stamp duty holiday appears to still be spurring on the market.  

The house moving industry has of course been delighted at the news, which suggests that the booming market is likely to continue well into 2021, despite the pandemic.

“The good news is that the banks are increasingly eager to lend and we have started to see major institutions return to lending to buyers with small deposits, in a boost for first time buyers. The bad news is that many banks still haven’t worked through a backlog of applications that built up during the lockdown and subsequent surge in activity during 2020, and will likely struggle to cope if activity picks up during the first months of this year” says Hina Bhudia, a partner at Knight Frank Finance.

“As we start 2021 we also believe that many home sellers will also be seeking to sell ahead of the Budget scheduled for the March 3 in case the Chancellor seeks to raise the rates of Capital Gains Tax on properties. If an increase in capital gains tax coincides with the end of the stamp duty holiday, we could see a significant fall in housing market activity and the chancellor may not see the anticipated increase in tax receipts” explains Anthony Codling, a senior market analyst and founder of PropTech platform Twindig.

Tomer Aboody, director of property lender MT Finance, suggests: “Household deposits have increased with people saving, due to not being able to go away, out for dinners or even shopping. Consumers are being frugal with their spending and considering the threat of a possible recession on the horizon. How the government will look to tackle any forthcoming concerns with the Budget, the end of furlough and stamp duty relief will be interesting, since this new wave of the virus has come as a surprise and therefore further potential assistance is desperately needed.”

And Mark Harris, chief executive of mortgage broker SPF Private Clients, adds: “Borrowers desiring a different property/location and/or motivated by the stamp duty incentive resulted in the highest levels of mortgage approvals for house purchase since 2007. Effective mortgage rates have risen slightly but remain historically low. These numbers show the dislocation between the cost of funds and interest rates passed onto borrowers as lenders manage volumes. We expect mortgage rates to remain competitive into the spring as borrowers attempt to take advantage of the stamp duty concession.”