Number of mortgages approved to home-buyers slumps to 16-month low

The number of mortgage approvals made to home-buyers slumped to a 16-month low in October as the stamp duty holiday ended, Bank of England figures show.

Some 67,199 home loans for house purchase got the green light – marking the lowest total since 40,475 approvals were recorded in June 2020.

The stamp duty holiday in England and Northern Ireland ended completely in October, after being tapered in July. Home-buyers had rushed to make the most of the discounts on the tax, causing housing market activity to bunch up earlier in the year.

Despite the dip, the Bank said October’s figure was still close to the 12-month average of 66,700 approvals up to February 2020.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “The market is settling down a little after what has been a frenzied few months.”

Geoff Garrett, director of broker Henry Dannell, said: “The temptation of a stamp duty saving spurred many home-buyers to enter the market earlier than they may have otherwise, and so a decline following the final deadline was only to be expected.”

Lucian Cook, head of residential research at estate agent Savills, said: “Our analysis shows that in the year to the end of September, we saw total spend in the UK housing market exceed £500 billion for the first time ever…

“That reflected the unusual coming together of three key factors – the so-called race for space as people looked to trade up the housing ladder, the cheap cost of mortgage finance and the added impetus of a stamp duty holiday.

“Activity in the more expensive price brackets continues to hold up strongly, so we expect to see higher than normal spend in 2022, though it’s difficult to see how spending next year can match the extraordinary levels of late across the market as a whole without such a mix of strong drivers.

“This supports our expectation that house price growth will slow to 3.5% next year.”

The Bank’s Money and Credit Report also showed that households borrowed a net additional £706 million in consumer credit in October. The figure includes borrowing on credit cards, overdrafts and personal loans.

Within the total, £637 million was credit card borrowing – marking the strongest net borrowing on credit cards since July 2020.

Households were also shoring up less money in savings in October, with £5.5 billion flowing into accounts.

When money being put into Treasury-backed NS&I accounts was also taken into account, a total of £6.4 billion flowed into these accounts in October.

This was significantly lower than an average net flow of £11.9 billion over the 12 months to September.

Despite the recent fall in money flowing into household savings, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said he expects households to continue squirrelling money away in the coming months.

He said: “Households set aside into savings accounts in October the smallest sum since the pandemic began, though the emergence of the Omicron variant likely will ensure that they remain cautious over the coming months.

“The £6.4 billion increase in total liquid assets was much smaller than the £11.9 billion average increase in the previous 12 months, and quite close to the £4.8 billion average increase in the two years before the pandemic.

“The decline in saving, however, likely reflects a combination of earlier than usual Christmas gift-buying and the jump in the CPI (Consumer Prices Index measure of inflation) in October, triggered primarily by the increase in the energy price cap.

“Meanwhile, the new Covid-19 variant likely will prompt some households to visit services venues less frequently, at least until more is known about the effectiveness of current vaccines.

“Accordingly, we expect households to continue to save an above-average share of their incomes at least until next spring.”