Mortgage Approvals Hit 13-Year High at End of 2020

According to the Bank of England, more mortgages were approved at the end of 2020 than at any time since the Global Financial Crisis. In its latest release of mortgage data, the Bank reported that more than 105,000 mortgages were signed off in November, the highest number of approvals since August 2007.

The 13-year-high has helped to offset sluggish performance earlier in the year partially, said the Bank. During the spring lock-down, mortgage approvals plummeted to just 15,800 in April- less than half the number of sales during the trough of the Global Financial Crisis.

However, pent-up demand from this temporary stalling spurred on eager applicants in the second half of the year, bringing the total number of house purchase approvals by November to 715 300- only 7100 behind that for the same period in 2019.

Lending interest rates also climbed to 1.83%, signaling plenty of activity as they edged closer to pre-lockdown levels of 1.85%; and putting comfortable space between current rates and the 1.72% lull of August.

While the virulent new strain of COVID-19 has raised some questions about the short-term sustainability of the UK's property boom, Tom Bill, head of UK residential property research for Knight Frank, is cautiously optimistic:

Most buyers will assume that a search started this week won't reach completion until spring, by which time the vaccination program will have changed the landscape, Furthermore, while the end of the stamp duty holiday in March will have an impact on transaction numbers, the effect will be reduced if the pandemic has entered the endgame.

And while many low-income and casual workers are likely to struggle as the furlough scheme winds up at the end of March, Bill claims this may only have a limited effect on the housing market as a whole.

Speaking to Knight Frank in December, Savvas Savory, chief economist at Toscafund, said:

In previous recessions, you had whole industries collapsing, whether it was milling, ship-building, or coal-mining and that I and whole towns and cities were affected. Skilled manual labourers who were the main breadwinners had to take jobs on inferior pay. Of course, unemployment will rise next year, but while bricks-and-mortar retail and leisure companies will cut jobs, there are industries who need similar skills that are hiring, like e-commerce and logistics, That's where the narrative around house prices fails.

The UK's housing boom is being driven partly by the temporary stamp duty holiday, as well as surging demand for more spacious properties away from city centers.

With millions of people spending much of 2020 working from home, many movers that the change in work habits brought about by lock-down could be here to stay.

According to Ian McKenzie, CEO of the Guild of Property Professionals, more than 21% of prospective buyers now say having space for a home office is important- compared to just 12% before lock-down.

In addition, the Guild claims that workers are more willing to live further from their place of work- up to 56 miles away, compared to just 23 miles at the start of the year.

Not having to commute as much means that people now have more freedom of choice when it comes to where they live, and they are able to explore areas that are further out but offer them more for their money.

said McKenzie