Mortgage Approvals in February Up Almost 40% on Ten-Year Average

There was further evidence of robust real estate market activity in February, with official data indicating a nearly 40% increase in mortgage approvals compared to the ten-year average.

New figures from the Bank of England show that around 87,700 mortgages were issued for residential property purchases in February, far above the average of just 63,500 over the last decade.

Total mortgage approvals dipped slightly from the 103,700 recorded in November last year and were also approximately 10% down on the 97,400 approvals recorded in January. The figures, however, are still highly reassuring given how comparatively few buyers in February were planning moves based on the government’s stamp duty holiday, which at the time was set to conclude on March 31.

Buyers who acted early had the opportunity to save up to £15,000 on their property purchases. Mortgages approved in February would not have given prospective buyers enough time to complete their purchases before the original deadline.

It has since been announced that the stamp duty holiday will remain in place with the full £500,000 nil rate band until the end of June, after which a reduced £250,000 nil rate band will apply until the end of September. This is likely to result in another significant spike in mortgage lending activity over the spring and summer months.

95% of LTV mortgages return to the high street

Along with the prospect of saving up to £15,000 by avoiding stamp duty, buyers are also likely to be motivated by a new mortgage guarantee scheme recently outlined by the government. The scheme is designed to encourage lenders to reintroduce 95% LTV mortgages with just a 5% deposit requirement, paving the way for property ownership for more first-time buyers than at any point in recent years.

Several banks announced that they would be taking part in the scheme at some point during April, while others immediately took advantage of the government’s offer and reintroduced 95% mortgages right away.

‘Mortgage rates remain low, and with the government introducing a guarantee scheme on high loan-to-values, there will be more choice for first-time buyers, the lifeblood of the market,’ one commenter said.

‘With several lenders, including Skipton, Yorkshire Building Society, and TSB, already launching 95 per cent deals, and others expected to follow suit in the coming weeks, rates could also potentially fall, which is further good news for borrowers.’

Total borrowing hits a new six-year high.

Along with mortgage approval volumes, the total amount of money borrowed for residential property purchases also reached a five-year high last month. The figures released by the Bank of England indicate a net total of £6.2 billion borrowed against properties in February, more than any single month since March 2016.

While mortgage rates may have increased slightly since last summer, average interest is still hovering at around 1.9%. Rock-bottom rates are expected to linger for the next few months at least, though they are likely to continue climbing as the UK economy returns to strength.