Mortgages surge in stamp duty holiday rush - BoE

Mortgage approvals hit their highest level since before the financial crisis in November as buyers rushed to arrange finance during the Chancellor's stamp duty holiday, a Bank of England survey showed.

Net mortgage borrowing rose to £5.7bn from £4.7bn a month earlier - the highest since March 2016 - and lenders approved 105,000 loans, up from 98,300 in October.

The number of approvals was the most since August 2007 - the month before Northern Rock's near-collapse heralded the credit crunch. November approvals were well ahead of analysts' average forecast of 83,500. Interest rates on newly drawn mortgages rose 5 basis points to 1.83% - little changed since January and up from a low of 1.72% in August.

Chancellor Rishi Sunak increased the threshold for stamp duty on property purchases to £500,000 from £125,000 to support the housing market during the Covid-19 crisis. His move has caused a mini-boom as buyers have hurried to push through purchases before the 31 March deadline and many experts expect the market to slow rapidly after the deadline.

Samuel Tombs, a UK specialist at Pantheon Macroeconomics, said: "Absent any government policy changes, we continue to think that the housing market will be very subdued in the summer, given that higher mortgage rates have reduced the ability of first-time buyers to participate in the market. The rollout of vaccines also will make people content once again with their pre-pandemic housing choices."

While the mortgage market surges households are tightening belts amid economic uncertainty with fewer opportunities to spend in shops and restaurants and with many saving on travel costs.

Overall consumer credit stayed weak in November as households repaid a net £1.5bn - more than double October's £0.7bn repayment. Households have repaid £17.3bn of consumer credit since March leading to shrinkage of 6.7% over a year - the lowest since records began in 1994.

Some economists are predicting a consumer boom when coronavirus vaccines allow life to return to something like normal but Tombs was more cautious.

"Some households likely will use the cash that they accumulated in 2020 to pay off debts when they become due," Tombs said. "We continue to think that households will spend only a small fraction of the 'enforced savings' that they accumulated last year, and that households’ overall expenditure will take until mid-2022 to recover to its prior peak."