Press release

29 Oct 2021 London, GB

Mortgage lending rises as stamp duty holiday ends – EY ITEM Club comments

The latest rise in mortgage lending reflected buyers racing to complete purchases before the stamp duty holiday ended.

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Related topics Growth COVID-19
  • The latest rise in mortgage lending reflected buyers racing to complete purchases before the stamp duty holiday ended. The EY ITEM Club now expects to see lending flows fall back and the pace of house price growth to slow.
  • The recovery in unsecured borrowing continues to lack momentum. Given real incomes face a range of headwinds over the months ahead, an increased appetite among consumers to borrow would be helpful in keeping the recovery on track.

Martin Beck, senior economic advisor to the EY ITEM Club, says:

“September’s data on lending to households from the Bank of England reported a rise in net mortgage lending to £9.5bn, up from £4.4bn in August, as buyers raced to complete their purchases before the stamp duty threshold returned to its normal level at the start of October. The lending data has made clear that the stamp duty holiday has been highly distortionary, causing transactions to be brought forwards and being a major factor behind the frothiness in prices over the past year. The flip side is likely to be a softening in demand over the coming months and a slowdown in house price inflation, or even a modest decline in prices. September’s 14-month low for mortgage approvals suggests this process is already underway.

“Net unsecured lending fell back to £0.2bn in September, following a sizeable net repayment of non-credit card debt. With gross unsecured lending still 10% down on its pre-pandemic level and increases in household deposits remaining high, consumers’ appetite to spend using credit clearly remains diminished. If the consumer recovery is to remain on track, this situation will have to change.

“Real incomes face a range of headwinds over the months ahead, including high inflation, a fiscal squeeze, and the likelihood of higher debt servicing costs. So, the consumer recovery will become increasingly reliant on households’ appetite for borrowing increasing, and on some of the ‘excess’ savings accumulated over the past 18 months being spent.”