Mortgage borrowing surges to record high in June ahead of stamp duty deadline

Mortgage borrowing hit a record high of £17.9 billion in June as homebuyers rushed to beat the stamp duty holiday deadline, Bank of England figures have shown.

The Bank said the net mortgage lending figure beat that of the previous £11.5 billion record set in March before the stamp duty tax relief was extended by three months to June 30.

But the Bank’s latest money and credit report showed that approvals for house purchases – an indicator of future borrowing – fell to 81,300 in June.

This was the lowest since July last year and down from 86,900 in May in a further sign that the UK property market may be cooling following the end of full stamp duty relief.

It comes after Nationwide Building Society’s index showed a 0.5% fall in house prices between June and July as the tapering of stamp duty relief came into effect.

Chancellor Rishi Sunak raised the stamp duty threshold temporarily to £500,000 at the start of the pandemic last year to support Britain’s property market.

Having extended the deadline from March 31 to June 30, the threshold has now been tapered to £250,000 and will revert back to the original £125,000 level on September 30.

Jeremy Leaf, north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors, said the next set of Bank of England’s mortgage data will be eyed closely for signs of how much heat has been taken out of the market.

He said: “Only then will we be able to see just how far activity has fallen but certainly we don’t expect a major change based on what has been happening in the past few weeks on the high street.”

The Bank’s report also showed that households borrowed £300 million using consumer credit in June, further reversing a trend in recent months for people to pay off more than they borrowed.

The modest June increase in net consumer credit reflected borrowing such as car dealership finance and personal loans, the Bank said.

Credit card lending stood at £100 million, it added.

Lenders have been reporting increases in household demand for borrowing in recent months as coronavirus restrictions ease and the UK economy opens up.

But Britons have continued to pile cash into savings amid the pandemic uncertainty, with the Bank figures showing an additional £9.8 billion deposited with banks and building societies in June.

This is down from £14.7 billion on average in the six months to May but still far above pre-Covid levels.

Martin Beck, senior economic advisor to the EY ITEM Club, said: “With households’ saving deposits remaining above pre-pandemic levels, consumers are clearly some way from returning to normal spending patterns.

“But the 19 July removal of remaining Covid-19 restrictions should provide a spur to lending activity, particularly if this week’s decline in coronavirus cases continues.”

Among UK businesses, large non-financial firms borrowed the highest amount for seven months in June, at £800 million, but small businesses repaid £300 million of loans on a net basis, according to the Bank’s data.