Homeowners repaid £1.4bn more mortgage debt in July than they borrowed

1st September 2021
Holding house keys on house shaped keychain in front of a new home

The Bank of England’s (BOE) latest Monthly Money and Credit data for July showed that individuals paid back £1.4 billion more of mortgage debt than they borrowed in the month.

The net repayment followed record borrowing of £17.7 billion in June.

The data showed that this was only the second such net repayment in a decade and came after activity in the housing market slowed following the end of the full stamp duty holiday in England and Wales.

Mortgage approvals fell to the lowest level in a year in July, with 75,152 mortgage approvals in July, down from 80,272 in June. This came after the June 30 cut-off that saw the threshold for stamp duty relief – which had been available on purchases under £500,000 – reduced to £250,000.   

Commenting on the data Sarah Coles, Personal Finance Analyst, Hargreaves Lansdown said “Mortgage borrowing actually fell in July, which is rare enough to raise eyebrows, but not to spark panic among buyers and sellers. Fortunately for recent buyers, there are still signs of underlying strength in the property market, and record low mortgage rates don’t hurt either.”

“It takes something spectacular for mortgage lending to fall. The last time it happened was back in April 2020, when the first lockdown effectively shut the housing market. This time, the stamp duty holiday caused a frenzy in June, which came to a shuddering halt in July.”

“This isn’t an enormous shock. The stamp duty holiday encouraged people to bring their property purchases forward, so the market was always going to pause for breath when it ended. It’s just that after a marathon dash for the deadline, it has taken an unusually dramatic pause.”

“There are plenty of signs of underlying strength in the market, driven by the fact that mortgage holders are paying record low rates, and there’s still demand from people wanting to change their lifestyle as a result of the pandemic. When you add in the fact we’re still seeing a real shortage of properties on the market, this should help support house prices. We may well see the rate of rises start to taper off. However, anyone who has bought during this frenzied period will be relieved to know that there’s no imminent sign of collapse.”