BoE: Net mortgage borrowing reaches £6.2bn

Mortgage approvals for house purchase were at 87,700; although higher than in February 2020, this number has fallen from 103,700 since November 2020.

BoE: Net mortgage borrowing reaches £6.2bn

Net mortgage borrowing reached £6.2bn in February, the strongest figure since March 2016, according to Bank of England (BoE) Money & Credit figures.

 

Mortgage approvals for house purchase were at 87,700 in February; although higher than in February 2020, this number has fallen from 103,700 since November 2020.

Households continued depositing significant amounts, with an additional £17.1bn placed in February, while deposit interest rates remained at historically low levels.

Individuals continued making net repayments of consumer credit in February, at £1.2bn.

The effective rate on new personal loans remained low at 5.16%, compared to 7.03% in January 2020.

Private non-financial companies borrowed £0.7bn from capital markets in February, compared to a monthly average of £4.5bn since March 2020.

Net bank borrowing by small and medium sized businesses (SMEs) was £0.4bn in February, whilst large businesses made net repayments of £0.3bn.

Richard Pike, sales and marketing director at Phoebus Software, said: “The housing market, fuelled by government incentives, continues to move at a pace.

"With competition from buyers increasing it really is a seller’s market.

“This demand is naturally pushing house prices up in most areas, only the capital has seen prices falling as buyers look to escape city life following the pandemic, but the question has to be how much more can prices increase?

“With the ONS reporting that buyers may need to spend 7.8 times their annual earnings to buy a house in England, and 5.9 times in Wales, the question of long-term affordability raises its head again, at the same time as we are seeing more high LTV products coming to market.

“Surprisingly, the same report said that average earnings growth in 2020 outpaced house price growth in 60% of districts.

“So it will be interesting to see how much more demand will push prices upwards. It would be reasonable to think that the ceiling is close and to expect to see house prices level off.

“However, it is likely to be the second half of the year, when stamp duty returns to normal, arrears levels start to increase and schemes such as furlough are withdrawn, that we will see the true effect on the housing market.”

Joshua Elash, director of MT Finance, added: “The Bank of England data is hugely positive with lower levels of household debt and a booming property market driving economic activity and employment.

"The mortgage market continues to lead the way with the highest levels of borrowing in five years. We expect this to continue as the extension of the stamp duty exemption scheme ensures this trend continues in the next reporting cycle.

“With households reducing their debt during the pandemic period, and with the continuing strength of the housing sector, if the furlough scheme does manage to keep unemployment numbers to a minimum, we would expect a swift and significant economic recovery.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “The highest net borrowing in five years wasn’t really a surprise given the determination of buyers and sellers at the end of last year and the beginning of this to get deals over the line in order to take advantage of the stamp duty holiday.

“Also unsurprising was the dip in approvals. These are always a good indicator of future market direction and the dip occurred as many thought that benefiting from the stamp duty concession would be impossible in view of the backlog.

“However, since the deadline was extended and vaccination rollout has taken off, the market has gained new impetus and more balance as sellers in particular are not as fearful of welcoming visitors to their homes.”