Buoyant housing market sees mortgage approvals top 100,000 in a month

More than 100,000 mortgages were approved in November defying expectations that a strong bounce-back in the housing market was set to slow down.

Bank of England figures showed banks and building societies signed off on 104,969 home loans, the highest level since August 2007. Economists had pencilled in a figure of 82,500.

That meant there were 715,300 approvals in the first 11 months of 2020, just below the 722,000 seen a year earlier, even though the housing market was effectively shut due to COVID-19 restrictions earlier in the year.

The pandemic prompted a collapse in purchases during in April and May but demand has since bounced back strongly partly driven by a stamp duty holiday which is due to expire at the end of March.

It has also been attributed to an increase in working from home, driving a shift towards larger rural and suburban properties.

David Ross, managing director of property data company Hometrack, said the UK housing market “has enjoyed its busiest Christmas in over 10 years”.

Figures from lender Nationwide last week showed house prices rose by 7.3% year-on-year in December, the biggest annual increase in six years.

The boom contrasts with a darker picture for other parts of the economy, with the Bank of England data showing unsecured lending – such as credit card spending – again shrank at a record pace.

There was a net repayment of credit by consumers of £1.5bn in November leaving the outstanding level of such borrowing 6.7% lower than it was last year, marking the biggest annual drop since the data series began in 1994 and continuing a pattern seen earlier in the year.

Overall since the start of March, households have repaid £17.3bn of consumer credit.

The consumer credit weakness in November came at a time when households had a reduced ability to spend due to the latest lockdown measures, said Ruth Gregory, UK economist at Capital Economics.

“Stronger household balance sheets should mean that there is plenty of scope for household spending, and GDP, to rebound strongly once the restrictions are eventually lifted,” she added.

Howard Archer, chief economic adviser to the EY ITEM Club, said on the other hand that the strength of the housing market would “prove unsustainable sooner rather than later” once the stamp duty holiday ends and with unemployment likely to rise.

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