Consumers repay £1.5bn whilst mortgage lending hits 13 year high

5th January 2021

The Bank of England (BoE) latest figures have revealed that households repaid just over £1.5 billion of credit card debt, personal loans and car finance in November, with weaker consumer spending with the second national lockdown believed to be a contributing factor.

Net consumer lending dropping by £1.54 billion marking a 6.7% decline on the amount recorded in November 2019, with this being the biggest drop since monthly records began in 1994. Since the start of the coronavirus pandemic in March, households have repaid £17.3 billion of consumer credit.

Separate BoE data shows that mortgage approvals hit the highest level in 13 years in November, with 104,969 approved. This was up on the 98,338 recorded in October and marks the biggest total since August 2007. The surge has been attributed in part to the stamp duty holiday rolled out to boost the market after it was hit by the coronavirus outbreak and resulting restrictions, with the temporary relief on the levy driving activity and boosting prices.

In response to the latest figures Jonathan Sealey, CEO of specialist short term lender Hope Capital, says record-breaking numbers will continue to put pressure on the sector, and also on the Government to act on the SDLT holiday deadline. “Another record month in mortgage approvals for November is a real positive for the housing market of course. And to see that the strength of activity has almost fully offset the significant weakness earlier in the year demonstrates how powerful the incentive of the stamp duty holiday has been.’

“However, it is also likely to add to more pressure on the Government to extend or modify the March 31 deadline for the SDLT holiday. It will also add to pressure on the conveyancing sector as each month they deal with record-breaking numbers of purchases.”

“That’s why specialist and short-term finance will play a critical role in the coming weeks, as that pressure increases with buyers hoping to complete their purchase before the end of March. Buyers and brokers need to look at alternative ways of getting the deal over the line at speed, and the specialist finance sector is in a position to make that happen.”

John Phillips, National Operations Director of broker firm, Just Mortgages, said “The increase in approvals to levels we’ve not seen since the last recession shows the incredible resilience of the housing market. Despite an incredibly tough year, the housing market continues to progress and our brokers have supported a huge number of people to find the right mortgage product.”

“Looking ahead to 2021, despite expectations of a drop in activity as we approach the stamp duty holiday deadline, we anticipate the market will keep performing well. Beyond the stamp duty holiday, recent transactions have been motivated by people’s priorities changing. With working from home becoming the norm for many, an extra bedroom to use as a study has been high on the priority list. And looking ahead to warmer weather, there will be plenty looking for a garden so if there is another lockdown, they have space to get out and about in. With vaccines being rolled out, we expect confidence to build in the property market and 2021 should be another strong year.”