Recent news that mortgage borrowing has reached an all-time high is great news for developers and those looking to sell their homes or other properties. The record high shows that more people are moving home and suggests a shift away from renting towards buying. There are many reasons for this change including the extended stamp duty holiday, but the impact that this will have on the housing market in months to come is still being assessed.
In March 2021, according to the Bank of England, the population borrowed £11.8 billion more on mortgages than they repaid, with a gross mortgage borrowing of £35.6 billion. This has put net borrowing at its monthly highest since the start of recording comparable modern data in 1993. The current low Bank of England interest rates directly resulted in low mortgage rates, making borrowing and mortgages even more popular.

Eighty-three thousand new mortgages were approved in March, which is up from 73,000 mortgage loans approved in February 2020, at the start of the Coronavirus pandemic and first national lockdown, showing an increase in those looking to move home

During this time, the production and manufacturing industries including those focused on building new commercial and residential properties have continued to steadily grow for the eleventh month in a row. This suggests that the new properties looking to go on the market in the coming months are going to be met with huge demand which in turn raises prices.

A Market Boom

Due to the increase in borrowing, property prices are also on the increase, with Nationwide Building Society announcing an average price increase of almost £16,000 for the year ending April. This puts the average house price at nearly £240,000 and is expected to continue rising this year.

Economists believe that the market boom is mainly being fuelled by high-income groups, whose jobs were not affected by the pandemic. This also suggests an increased demand for higher-end homes, more complex and unique builds, or investment properties as this is unlikely to be the first home of someone within this group.

The Stamp Duty Break Extended Until June

The stamp duty holiday, which has been repeatedly extended during the period of the pandemic, continues to see homebuyers rushing to take advantage of it before it expires. The stamp duty holiday was extended until June 30th, 2021, and the buyers demand does not seem to slowing.

The tax rate will increase through July, August, and September, ending on September 30th, 2021. The stamp duty will then return to normal pre-COVID-19 levels on October 1st, 2021. Due to this it is expected that the housing market will slow during these months in comparison which could in turn cause a drop in prices but the long-term impact of this is still being monitored with much debate surround the ‘post covid’ housing market.

If you are looking to complete your build please get in touch with BLG to see how our finance options can help.

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