Housing market mini-boom sees mortgage approvals soar to new 13-year high after coronavirus stamp duty holiday

A HOUSING market mini-boom has sent the number of mortgage approvals soaring – and is now at a new 13-year high.

It suggests that the current stamp duty holiday, and pressure to move to larger properties since the lockdown began, is fuelling demand for those looking to move or get on the property ladder.

Bank of England figures and estate agents have revealed there is now a ratio of 13 potential buyers to every available property after house hunter numbers have surged.

The number of mortgage approvals for house purchase continued to increase into September, to 91,500 from 85,500 in August, the Bank of England's Money and Credit report said.

This was the highest number of approvals since September 2007, and 24% higher than approvals in February this year.

However, the Bank's figures for remortgaging approvals, which only capture remortgaging with a different lender, show a slight dip compared with August, at 32,700, which is 38% lower than in February this year.

Howard Archer, chief economic adviser to EY ITEM Club, said: "September's 13-year high for mortgage approvals provides clear evidence of the marked pick-up in housing market activity that has occurred since pent-up demand was released by the easing of restrictions from mid-May onwards.

"This buoyancy has been reinforced by the Chancellor raising the stamp duty threshold to £500,000 from mid-July through to March 31, 2021."

The figures were released as the National Association of Estate Agents (NAEA) Propertymark said the number of prospective home buyers reached a 16-year high in September.

It said the number of prospective buyers registered per estate agent branch leapt by a third month-on-month.

This was the highest number of house hunters recorded since June 2004.

FIRST TIME BUYER WOES

But in a sign that lenders are toughening up on low-deposit mortgages, its figures also show the proportion of sales made to first-time buyers stood at 19% in September – the lowest amount recorded since March 2013.

Many low-deposit mortgages have disappeared from the market during the coronavirus pandemic, amid concerns about jobs uncertainty and the potential for house prices to fall, which could leave some home owners in negative equity.

But in some better news for first-time buyers, Lloyds Bank reintroduced its Lend a Hand mortgage on Thursday.

It aims to help those struggling with a deposit by enabling them to borrow up to 100% of a mortgage with family support.

The Lend a Hand mortgage has a three-year fixed rate at 3.25%.

It comes after a new mortgage deal was announced aimed at helping first-time buyers onto the property ladder that lets up to six family members or friends apply for a loan.

The Home Booster mortgage from start-up lender Generation Home lets multiple people apply for the same mortgage to increase the amount that can be borrowed.

The idea is this will either help groups of friends who want to live together or it will help first-time buyers struggling to get a big enough mortgage on their own.

Instead of a deposit, a family member stumps up 10% of the purchase price as security in a linked savings account, which earns interest. The savings and interest are released after three years, provided all the mortgage payments have been kept up with.

Mark Hayward, chief executive of NAEA Propertymark, said: "The pressure of completing sales ahead of the stamp duty holiday deadline means we've seen a large spike in buyers and sellers coming to the market – with an average of 13 buyers to every available property.

"This boom has been hugely beneficial for the housing market.

"However, with a stamp duty cliff edge on March 31, we are calling on Government to rethink these timings due to the increased pressure on service providers within the industry which is causing delays for buyers and sellers.

"Failure to find a solution to the cliff edge, whether that be a taper or extension, could cause thousands of sales to fall at the final hurdle and have a knock-on and drastic effect on the housing market which has recovered well from the Covid slump."

What is stamp duty?

STAMP duty land tax (SDLT) is a lump sum payment anyone buying a property or piece of land over a certain price has to pay.

Up until July 8, most house-buyers in England and Northern Ireland had to pay stamp duty on properties over £125,000.

This was temporarily increased to £500,000 until March 31, 2021 in the government's mini-Budget in July 2020.

The rate a buyer has to fork out varies depending on the price and type of property.

Rates are different depending on whether it is residential, a second home or buy-to-let, or whether you're a first-time buyer.

The usual system in England for residential properties means:

  • First-time buyers pay nothing on properties below £300,000 (and relief available on properties of up to £500,000)
  • You pay nothing if the property costs below £125,000
  • You pay 2% if it is worth between £125,001 and £250,000
  • You pay 5% if between £250,001 and up to £925,000
  • You pay 10% if it is between £925,001 and £1.5million
  • You pay 12% on anything over £1.5million

For second homes or buy to let properties:

  • 3% on purchases up to 125,000
  • 5% on purchases between £125,001 and £250,000
  • 8% on purchases above £250,001 and £925,000
  • 13% on purchases above £925,001 and £1.5 million
  • 15% on purchases above £1.5 million

Stamp duty rates are different in Scotland and Wales.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said borrowers need to consider how long an application is likely to take to be processed.

He said: "Price and criteria are key when choosing a mortgage, but you also need to consider how long it is going to take. There is no point in trying to get a mortgage from a lender who is six months behind if you need to exchange in four weeks."

Jeremy Leaf, a north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors, said: "Unless buyers suddenly change course and cancel mortgage offers, most of these are likely to turn into transactions. Once again the market is proving its resilience."

But Andrew Montlake, managing director at mortgage broker Coreco, said that while the latest figures are welcome, "the post-lockdown bull run is already over".

He added: "What's crucial is that the major lenders don't go too far and start pulling products for more robust borrowers with larger deposits.

"As surreal as 2020 has been, the onus is on lenders to keep it real as we enter the winter months."


What help is out there for first-time buyers?

GETTING on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.

Help to Buy Isa – It's a tax-free savings account where for every £200 you save, the Government will add an extra £50. But there's a maximum limit of £3,000 which is paid to your solicitor when you move. These accounts have now closed to new applicants but those who already hold one have until November 2029 to use it.

Help to Buy equity loan – The Government will lend you up to 20% of the home's value – or 40% in London – after you've put down a 5% deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.

Lifetime Isa – This is another Government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the Government will add 25% on top.

Shared ownership – Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25% to 75% of the property but you're restricted to specific ones.

"First dibs" in London – London Mayor Sadiq Khan is working on a scheme that will restrict sales of all new-build homes in the capital up to £350,000 to UK buyers for three months before any overseas marketing can take place.

Starter Home Initiative – A Government scheme that will see 200,000 new-build homes in England sold to first-time buyers with a 20% discount by 2020. To receive updates on the progress of these homes you can register your interest on the Starter Homes website.

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