The total value of new mortgages set to be handed out in the coming months reached its highest level since 2007 towards the end of last year, Bank of England figures reported.
New mortgage commitments in Q4 2020 totalled £87.7 billion, marking the highest figure since the third quarter of 2007, according to the Mortgage Lenders and Administrators statics.
However, the proportion of very low deposit mortgages being handed out in the fourth quarter of 2020 shrank to the lowest since records started.
The Bank said the share of mortgages advanced to borrowers with deposits of less than 10% was 1.2%, marking ‘the lowest level since these statistics began in 2007’.
Some 40% of mortgages handed out in the fourth quarter were for people with deposits of less than 25%. This was broadly unchanged compared with a year earlier, the Bank said.
Meanwhile, gross lending totalled £249 billion in 2020, showing a 9.8% fall compared with 2019 (£276 billion).
The government has recently unveiled a new 5% deposit mortgage guarantee scheme to help reinvigorate the low deposit end of the market. It has also extended a stamp duty holiday, which had been due to end on March 31. Stamp duty thresholds will not completely revert to normal levels until October.
Mark Harris, chief executive of mortgage broker SPF Private Clients, says: “The Bank of England figures illustrate the strength of the uptick in the housing market as we headed towards the end of the year.”
“The experience of lockdown and subsequent desire for more space, combined with the stamp duty holiday and record low interest rates, have persuaded many to take the plunge and move.”
According to Harris, high loan-to-value (LTV) mortgages were harder to come by as lenders reined back on 90% LTV lending and above.
“The gvernment’s decision to introduce a mortgage guarantee to encourage lenders to offer 95% mortgages once more will make a difference to first-time buyers and others who simply can’t raise a significant deposit,” he explains.
Jeremy Leaf, a north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors (RICS), adds: “These comprehensive figures clearly illustrate the tidal wave of transactions trying to take advantage of the stamp duty holiday, prior to its recent extension.”
Paul Stockwell, chief commercial officer at Gatehouse Bank, comments: “The stamp duty extension announced in the Budget will help to ensure many of these mortgage agreements carry through to completion and gross mortgage advances in the first three months 2021 are likely to be strong.”
Phil Bailey, director at Twenty7Tec, explains: "Bank of England figures clearly show the ongoing demand and need for mortgages in the UK. Broker activity in 2021 is already reaching new highs over the previous year, even prior to the pandemic."
"The growing number of available mortgage products in the market is also showing the increased confidence lenders have, reaching their highest level since pre-covid. We expect this appetite and increased demand to continue as buyers, home movers and even lenders look for one more chance to benefit from the stamp duty reduction."