UK mortgage lending rose by the highest monthly amount on record in March, driven by a “frenzied rush” of people seeking to buy property ahead of the expected ending of the stamp duty holiday.
Net mortgage borrowing was £11.8bn in March, the strongest since records began in April 1993, according to data published on Tuesday by the Bank of England.
The sharp rise was driven in part by the expected ending at the end of March of the temporary stamp duty relief — exempting buyers from paying the tax on the first £500,000 of the residential property purchase in England and Northern Ireland. The measure was extended to the end of June in the March Budget.
Andrew Montlake, at independent mortgage broker Coreco, said that this “mad” March mortgage data highlighted the “frenzied rush” of people to buy a property and “save thousands of pounds on stamp duty”.
There were 82,700 approvals for house purchases in March. While this was lower than the peak in November, it was still 13 per cent higher than in February 2020, before the first pandemic restrictions.
Andrew Wishart, property economist at Capital Economics, said: “Timely indicators of demand suggest that mortgage approvals will pick up again ahead of the new stamp duty deadlines of the end of June and September.”
Simon Gammon, managing partner at the mortgage adviser Knight Frank Finance, said the property market was “red hot” and that the brightening economic sentiment, limited housing stock and changes to styles of working and living created a “potent mix” likely to drive prices up further well into the summer months.
The BoE data also showed that UK households continued adding significant amounts to their bank accounts, with another £16.2bn deposited in March.
This was well above the £4.7bn monthly average for the year to February 2020, before the first pandemic lockdown, reflecting limited spending opportunities during the restrictions while incomes have been largely protected by government support schemes. It brings the cumulative value of deposits since March 2020 to almost £200bn, another record figure, alongside the largest contraction in GDP in more than 300 years.
Consumers also repaid another £500m of their debt in March, adding to significant net repayments in other recent months, suggesting the ability to save has been used to improve household balance sheets.
Ruth Gregory, senior UK economist at Capital Economics, said that the data showed households “have enough firepower to finance a spending spree” as the economy reopens. “With consumers in position to power the recovery, this should mark the start of a rapid recovery that will push GDP back to its pre-crisis level in early 2022,” Gregory added.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, calculated that net of small withdrawals from National Savings accounts, the excess savings were equivalent to almost 8 per cent of UK GDP in 2020 and could provide “plenty of fuel” for a consumer-led boom this summer.
However, he warned that with consumers’ confidence still marginally below its long-run average and with pensions underperforming “only a small fraction” of this cash was expected to filter back into the economy.