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UK mortgage approvals at lowest level since mid-2020

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The number of mortgages approved for UK house purchases fell to its lowest level in 16 months in October as the “distortive effect” of the stamp duty holiday came to an end.

Figures from the Bank of England showed that 67,200 new homebuyer mortgages were approved during the month, down from 71,851 and well below the high of 104,547 recorded in November 2020.

The Bank’s data also showed a sharp fall in the sums advanced to borrowers over the month, with net mortgage lending of £1.6bn in October, down from £9.3bn in September.

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However, the falls follow a frenzied few months in the UK property market where, according to figures from one firm, more than £500bn was spent on homes in the year to September.

Stamp duty breaks across the UK led to a rush to buy, which, combined with changing priorities for buyers as a result of the coronavirus pandemic, brought forward sales and meant larger homes became more popular.

“October’s decrease was driven by borrowing brought forward to September to take advantage of stamp duty land tax relief, before it was completely tapered off,” the Bank said.

Remortgaging activity continued to rise in October as lenders vied for customers with ultra-cheap deals while speculation about an interest rate rise picked up.

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A total of 41,642 remortgages were approved during the month, compared with 32,745 in the same period last year.

Lucian Cook, the head of residential research at the property firm Savills, said: “There is no great surprise to see a fall in the number of mortgage approvals in October, given the distortive effect of the end of the stamp duty holiday in September.”

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His research shows that in the year to the end of September, £513bn was spent in the UK housing market – the first time the figure has exceeded £500bn and £170bn more than pre-pandemic levels.

“That reflected the unusual coming together of three key factors, the so-called race for space as people looked to trade up the housing ladder, the cheap cost of mortgage finance and the added impetus of a stamp duty holiday,” he said.

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“Activity in the more expensive price brackets continues to hold up strongly, so we expect to see higher than normal spend in 2022, though it’s difficult to see how spending next year can match the extraordinary levels of late across the market as a whole without such a mix of strong drivers.”

Anthony Codling, a housing analyst and chief executive of the property firm Twindig, said the Bank’s figures for mortgage approvals were “comforting” and suggested that the housing market was returning to normal after the stamp duty break.

“At 67,199, mortgage approvals in October were 2.7% ahead of their 10-year average, suggesting that the housing market is a long way away from the cliff edge,” he said.