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Home purchase activity highest since 2007 – UK Finance

  • 02/09/2021
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Home purchase activity highest since 2007 – UK Finance
Home purchase activity in the second quarter of this year was the highest since 2007, driven in large part by the stamp duty holiday.


According to UK Finance’s latest Household Finance Review, purchase activity during the period, which combined new loans issued to first-time buyers and movers, came to 244,860 compared to 46,520 in the same period last year.

The report said that first-time buyer new loans amounted to 112,340, whilst mover new loans were pegged at 132,520. Buy-to-let (BTL) new loans for the second quarter were 32,400.

It said the strong activity was fueled by the BTL market and first-time buyers, with BTL landlords completing 15,200 new loans in June, the largest monthly volume of purchases since 2016. First-time buyers were buoyed by the renewed Help to Buy equity scheme.

It continued that a large part of the activity was due to the stamp duty holiday, as well as delayed purchases from previous lockdowns going ahead.

Homeowner purchase levels in the first two quarters of this year have either returned to or are higher than levels prior to the pandemic, UK Finance said.

Purchase activity in London tripled compared to the same period last year, along with Northern Ireland and the South East. Wales, South West and East Anglia all more than doubled.

However, the report said this high level of lending is unlikely to be sustained in the medium to long-term, adding that it expected a decline in activity as the stamp duty holiday and other forms of government support were wound up.

It pointed to job losses from the furlough scheme ending as a potential concern.


Broker views

Overall, brokers said the figures showed that market was strong and recovering well, but they warned that the withdrawal of government support could pose a threat.

Primis’ proposition director Vikki Jefferies said the figures were “reassuring” as the property market was vital to the UK economy.

She added: “However, as government support comes to an end, it is important to note that the long-term impact of the pandemic may not yet be visible, and it will be vital to provide proactive and sustained support for brokers.”

John Phillips, national operations director at Just Mortgages added that the second quarter had been “the most extraordinary few months we’ve seen in a long time”.

He added: “The massive rush is not the result of borrowers over-extending themselves however. Although loan-to-income ratios for purchases increased over the second quarter, borrowers are still in a strong position. Thanks to extended mortgage terms, and low interest rates from lenders, borrowers are paying record low monthly payments.

“Brokers should take some credit for this. By providing expert advice, they are ensuring their clients are not overstretching themselves, even with rapidly increasing house prices.”

Legal & General Mortgage Club’s director Kevin Roberts said the strong activity levels were a good sign after such an uncertain period during the pandemic, and there was “little evidence” that this was going to fall away to a great extent.

He said: “However, though it is brilliant to see that those in a position to move home have done so successfully, many others have seen their financial circumstances complicated significantly by the crisis. People across the UK have needed to access financial support – everything from mortgage payment deferrals to income support and other benefits – and they now likely need extra help when it comes to managing their mortgage.

“This is where seeking financial advice is key, as independent mortgage brokers can help these people to keep their monthly repayments to a minimum by accessing a new deal, even if that means looking beyond the high street.”


Later deferrals grow but early arrears dampened by payment deferrals

The report said that the payment deferral scheme, which allowed borrowers up to six months respite from mortgage payments and came to an end in July, had been successful as it had limited those in early arrears.

First charge mortgages outstanding came to 11,034,000, up from 10,956,000 in the same period last year.

Those borrowers with arrears less than five per cent of the total outstanding balance, continued to decline in the second quarter as they were suppressed by payment deferrals and Coronavirus Job Retention Scheme.

However, UK Finance said the number of those in later arrears, which is 10 per cent or more of the outstanding balance, was increasing as these were mainly borrowers who were struggling before the pandemic, meaning payment deferrals and lender support had limited impact.

Early arrears are expected to increase as lender and government support schemes are rolled back, but further tailored help should be available for borrowers from lenders going forward.


Possessions up slightly quarter-on-quarter

In Q2, there were only 80 more possessions than in the previous quarter, coming to 440 in total, as government restrictions came to an end in May this year.

Ministry of Justice figures said mortgage possession claims increased from 161 in the second quarter last year to 2,498 this year.

The figures also showed that possession orders nearly tripled to 402 annually during the period, and warrants grew from 10 to 513. Repossessions by county court bailiffs rose from three to 44 in the second quarter.

However, the Ministry of Justice report explained that compared to pre-pandemic figures in 2019 claims, orders, warrants and repossessions by county court bailiffs have decreased by 60 per cent, 90 per cent, 89 per cent and 96 per cent respectively.

UK Finance said this demonstrated a “slow and considered approach” from lenders. It also said it expected numbers to rise moderately throughout the rest of this year and next year as lenders resubmit possession claims and the court backlog lessens.

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