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Mortgage market being driven by stamp duty holiday stampede

MORTGAGES | 07.12.2020

There’s been a huge rush of borrowers looking to take advantage of the government’s holiday on stamp duty, which was also cut in an emergency mini-budget earlier this year. This stampede of borrowers looking to take advantage of the holiday before it ends has driven a slew of mortgage approvals last month. In fact, approval has risen to their highest level since 2007.

A surge in mortgage approvals

Despite the on-going pandemic and the unemployment and an economic uncertainty it has caused, overall approvals home purchases increased by 97,500 last month, which was the highest for around 13 years.  This number was actually 33% higher than mortgage approvals in February this year, which was before the pandemic really hit the UK, at least according to data from the Bank of England. Experts are now predicting this surge to continue strengthening the market until March next year, which is when the nine-month stamp duty holiday is due to finish. 

Low interest rates supporting market

It seems that the continued demand that the mortgage market is experiencing is being supported by ultra-low interest rates. The Bank of England has released data that shows the  actual interest rates paid on newly drawn mortgages continues to be below pre-pandemic levels.  At the beginning of 2020, the average interest rate was 1.85%, and in October it was 1.78%. The strategic economist for Yorkshire Building Society, Nitesh Patel, was quoted as saying that the market is continuing to “defy economic logic” and was surging “despite challenging economic conditions caused by the global Covid-19 pandemic and uncertainty over the UK’s trading deal with the EU”. Despite the surge there are still concerns that market activity could drop next year without further government support and higher mortgage rates, which will result in a reversal of this year’s rise in house prices. There are also concerns that consumers were reining in their spending due to the tiered restrictions introduced by the government to control the spread of the virus.

Are you looking to take advantage?

Are you looking to take advantage of things while the stamp duty holiday is still active? If so, we can help. It’s true that the economy has suffered during these unprecedented times, but the still going holiday could help borrowers looking to buy homes on the lower end of the market. If you’re looking for a mortgage or a remortgage we can help. We’re independent mortgage brokers in Manchester who can help you get the very best deal. The stamp duty holiday isn’t over yet, so this could be the perfect time for you to buy a property.
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