Net mortgage borrowing rebounded to £6.6 billion in May from £3.0 billion in April, but remained below the record £11.4 billion in March. Mortgage approvals for house purchase were 87,500 in May, up very slightly from 86,900 in April, but lower than the recent peak of 103,200 in November 2020.
For the first time since August 2020, consumers borrowed more as consumer credit than they paid off in May. Net borrowing was £0.3 billion. The effective rate on new personal loans remained low at 5.61%, compared to 7.03% in January 2020.
Households’ net flow in to deposit accounts fell again in May, to £7.0 billion. Deposit interest rates fell slightly to new historically low levels.
Large businesses made net repayments of £1.9 billion of loans in May, with small and medium sized businesses also making their first repayment, of £0.4 billion, in over a year. Private non-financial companies raised £0.6 billion of finance from capital markets in May, compared to a monthly average net issuance of £3.3 billion since March 2020.
Andrew Montlake, managing director of London-based independent mortgage broker, Coreco: “Even though the chance of beating the Stamp Duty deadline was remote, mortgage approvals remained high in May. This shows that record low borrowing rates and the radical shift to homeworking have been as much a driver of transaction levels as tax savings. The knock-on effect of a fundamental lack of stock is pent-up demand, especially among first-time buyers and landlords, and this will support activity levels over the summer. The increased appetite among lenders for self-employed borrowers is also boosting mortgage take-up. Lenders are increasingly concluding that self-employment may be less of a risk than employment in the current market.”
Rhys Schofield, Managing Director at Belper-based Peak Mortgages and Protection: “Demand for mortgages in May was definitely sharper than in April. A year or so of enforced asceticism has seen many people manage to save up for a deposit and that has continued to generate activity across the market. Even though many people have missed out on the first phase of the Stamp Duty holiday, there is still a lot of demand for property among a nation of aspiring homeowners.”
Imran Hussain, director of Nottingham-based independent mortgage broker, Harmony Financial Services: “Demand for mortgages in May was as high as it was in April. The only problem was the lack of stock for sale meaning many people couldn’t make use of a mortgage even if they wanted to. Over the past year and a half, many people have focused on paying down debt, partly because they haven’t been able to spend money down the pub or on holidays, and this will ensure a certain level of demand remains despite the end of the Stamp Duty holiday. Household finances may well start to deteriorate later this year when the furlough scheme comes to an end and many companies are forced to cut their numbers to remain viable.”