• Mortgage market sees the highest approval rates since 2007. 
  • Homebuyers and investors rush to beat the stamp duty holiday deadline.
  • Interest rates could drop slightly in 2021.

Mortgage approval rates

Recent Bank of England figures revealed that 105,000 mortgages were approved by building societies and banks in November – the highest level since August 2007. The approvals increase was up from 97,532 one month earlier in October and tenfold since May when numbers plummeted to 9,400.

Homebuyers and investors rush to beat the stamp duty holiday deadline

Recently, the recovering strength in mortgage borrowing shows the keen desire of many to take advantage of the stamp duty holidayThe Government put the stamp duty holiday in place to help buyers when many are facing the coronavirus’s financial hardships.

According to Chancellor Rishi Sunak the average stamp duty savings have been £4,500 and, with the policy, nearly nine out of ten home buyers pay no stamp duty at all. Now the tax holiday is coming to an end the number of property sales has continued to rise, putting pressure on lenders to keep up with the demand. 

The spike in demand has put mortgage approvals at record levels, which almost offset the decline at the COVID-19 pandemic. In 2020, there were 715,300 house purchase approvals before November, close to the 722,000 seen in the same period in 2019.

Kate Faulkner, housing expert, predicts ‘a lull in activity in April and May if the stamp duty holiday isn’t extended’ but remains optimistic that ‘there is enough demand for 2021 to deliver another good year for transactions.’

 

Mortgage products 2021

As lenders are gaining more confidence, there has been a rise in the number of mortgage products available. Homebuyers and investors will continue to embrace the additional option of mortgages on offer throughout the year.

First-time buyers

The added competition in the sector affects buyers with smaller deposits the most. First-time buyers have particularly struggled to obtain mortgages since the coronavirus outbreak, but if they have at least a 10% deposit, there are now more opportunities coming to the market. 

Loan-to-value

In 2021, 95% loan-to-value (LTV) mortgages are expected to remain almost obsolete. These mortgage products will only be used by first-time buyers getting their homes through the Help to Buy scheme. The absence of 95% LTV mortgages may require some buyers to postpone their purchasing plans.

Interest rates 

During 2020, mortgage interest rates stayed competitively low, but recently interest rates have started to rise. Throughout 2021, more lenders are predicted to come back to the market, creating more competition in the sector. If this happens, interest rates could fall slightly in 2021.

Rachel Springall, finance expert, says:

“While there is still a long way for mortgage availability to reach pre-coronavirus levels, it’s continuing in the right direction… with interest rates expected to remain low, 2021 could be an effective time to secure these competitive mortgage rates.”