Latest figures from the Bank of England (BOE) have shown that lending fell by £16.6 billion over the past year. The figures also reveal that deposits in bank and building society accounts rose by almost £ 21 billion in December, whereas pre-pandemic they typically increased by about £5 billion a month.

Separately the figures showed that mortgage approvals hit their highest level since 2007. Mortgage approvals rose to 818,500 in 2020, exceeding the 789,100 recorded in 2019 and hitting the highest level since 2007. While the first nationwide coronavirus lockdown prompted a slump which saw fewer than 9,400 mortgage approvals in May, an all-time low, 103,381 loan applications were approved by banks and building societies in December, with a surge in activity in H2 as buyers sought to take advantage of the stamp duty holiday.

The value of loans approved in December hit £22.3 billion, the highest monthly level on record, while the value of loans across the year exceeded £171 billion – the highest total since 2007.

Net mortgage borrowing remained strong at £5.6 billion in December. Effective interest rates on new mortgage borrowing rose to 1.90%, the highest since October 2019.

Net bank borrowing by small and medium-sized businesses was a record £43.3 billion in 2020 compared to £1.4 billion in 2019. Large businesses made net repayments of £5.8 billion in 2020 compared to net borrowing of £13.8 billion in 2019.

Commenting on the figures, Richard Pike, Phoebus Software Sales and Marketing director, said “When you consider that the housing market was effectively closed for two months in 2020, it is quite amazing to see that we ended the year with more approvals than overall in 2019.  To say it has been a roller-coaster is something of an understatement, given the effect the pandemic has had across the world.  However, the overall effect on the housing market, despite the buoyant figures, is one that some will be feeling is not necessarily for the better.”

“The increased demand has pushed prices up and first-time-buyers are again feeling the brunt.  With the average deposit needed now over £10,000 more than it was a year ago, according to research by Halifax, getting onto the property ladder is becoming harder again.  The need for higher LTV lending is obvious although, for lenders, the ongoing economic impact and the risk of rising unemployment is a concern for long term affordability.”