Bank of England says mortgage borrowing “remains robust” in January

In January the mortgage market remained relatively strong, seeing growth in net mortgage borrowing and approvals holding steady, according to the latest Money and Credit data from the Bank of England.

At £5.2 billion in January, the figures shows that net mortgage borrowing “remained robust”, compared to the monthly average of £4.0 billion in the six months to February 2020.

House purchase in January saw 99,000 mortgage approvals, in par with the average of 100,000 since October 2020. Although this was a slight drop than in December (102,800) it was still well above the monthly average of 67,900 in the six months to February 2020.

Remortgaging with a different lender approvals fell slightly to 32,400.

Effective interest rates fell by 5 basis points to 1.85% on new mortgage borrowing. That is in line with the rate in January 2020, and compares with a series low of 1.72% in August 2020. The rate on the outstanding stock of mortgages fell to 2.09%, a new series low.

David Whittaker, CEO of Keystone Property Finance, commented: “Today’s statistics show that the housing market remained resilient as the new year kicked off, with demand for property continuing to rise as people take advantage of low interest rates and the stamp duty holiday. However, it’s clear that mortgage transactions are beginning to slow as the impact of the third national lockdown on consumer confidence and uncertainty about the future of the stamp duty holiday takes hold.

“In addition, while demand for property has remained strong, data shows that the supply of new property has decreased since the beginning of the year. As well as navigating this unprecedented market, buy-to-let borrowers have an added challenge of dealing with recent and upcoming regulatory changes. As such, the value of advice for landlords cannot be understated. The role of mortgage brokers has never been more important in helping landlords understand this shifting landscape and find the right mortgage for them and their individual circumstances.”

Joshua Elash, director of MT Finance, added: “There is an astounding level of liquidity in the market at a time when the economy itself is in a state of partial paralysis. It is unusual and feels dysfunctional.

“Consumer borrowing is down, as lockdown continues to bite into people’s ability to go out, shop, and enjoy the things in life we usually take for granted. This new reality has meant that households continue to deposit savings at remarkable levels, given that interest rates are at historically low levels.

“Net mortgage borrowing is also robust, encouraged by the stamp duty holiday and effective interest rates as low as 1.85 per cent. With the Chancellor rumoured to be rolling out a mortgage guarantee scheme, which will see the return of higher loan-to-value deals, this trend will continue, leading to serious inflation in property prices.”