Mortgage lending in the UK shrinks after “frenzied excitement”

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UK mortgage lending declined in April after a record high as homebuyers rushed to take out loans before stamp duty ended, according to the Bank of England.

Net mortgage lending stood at £ 3.3bn in April, up from £ 11.5bn in March and lower than the monthly average of £ 5.7bn in the six months to February, while total lending and redemptions exceeded the level at the beginning of 2020.

The drop followed a “frenzied influx” of home deals at the scheduled end of the stamp holiday, offering tax breaks on the first £ 500,000 on residential property purchases due to end in March.

Increased demand as people tried to move home after months of isolation sparked the UK property market and caused prices to rise. 10.9% per year I’m at home.

Bank of England data show that home transactions continued to rise after the government extended stamp duty leave until the end of June. The number of approved mortgages rose from 83,400 to 86,900 between March and April.

Mark Harris, executive director of mortgage brokers SPF Private Clients, said it was no surprise that lending fell in April, but demand returned after the stamp duty window was extended to the end of June.

“Given that a number of lenders are launching products with prices below 1%, it is obvious that there is a desire to provide loans and there is cash for this,” he said.

“It looks like low borrowing rates will persist, at least for a while, and will continue to support demand for property purchases.”

People have saved more than usual in isolation, but there are early signs of rising costs as restrictions ease.

In April, households saved an additional £ 10.7 billion in banks and building societies. This was less than £ 16.1 billion in March, but still sufficient compared to an average monthly net deposit of £ 4.6 billion in the six months to February 2020.

Consumers paid less on their loans than in previous months, returning £ 0.4 billion, up from a monthly average of £ 1.7 billion last year. Thomas Pugh, UK economist at Capital Economics, said that the balance of payouts and deposits suggests that people finance spending, potentially investing their savings.

The likelihood of squandering savings revived the specter of inflation after a period of moderate price increases. Samuel Thombs, chief economist at Pantheon Economics for the UK, warned that “the economy will overheat if households spend a significant portion” of the money invested in the pandemic.

He added that surveys and high levels of casual mortgage payments, which totaled £ 1.9bn in April, up from a two-year average of £ 1.5bn, suggest that households are more likely to save than spend.

“These numbers suggest that our assumption that households will quickly return to spending the same share of their income as before the crisis is probably correct,” Pugh said.

“But there is a risk that consumers will spend more of their savings than we expected.”

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