British mortgage lending slumped in April because of the government’s decision to prolong a tax break on property sales came too late to influence buyers that month. But housing market activity looks on course to rebound. This is shown by the Bank of England data.
Net mortgage lending by British lenders slumped in April to 3.3 billion pounds ($4.7 billion). A month before the record was 11.5 billion pounds. An even sharper drop than the fall to 6.6 billion pounds forecast by the economists. The BoE said that the recent variability is likely to reflect the reduction in the stamp duty tax, which was initially expected to end in March. But it is now being extended to the end of June. Sunak announced that he would extend the tax break in his March 3 budget. But many buyers were already rushing through transactions to complete them before the earlier deadline.
In July last year, the cut in stamp duty land tax began to spur housing transactions. This is only after the slump after the start of the pandemic. House prices have boomed since then. Despite the economic damage wrought on other sectors by this pandemic, with prices in May up 10.9% on a year ago. According to lender Nationwide, this is the biggest jump since 2014. Greater demand for spacious housing outside city centers, has been another key factor for increase in prices. This is mostly from the work from home people.
Mortgage approvals which adjusted faster than lending to the tax change rose to 86,921 in April from 83,402 in March. Households continued to pay down personal debt, largely reflecting reduced spending opportunities during the lockdown. Net repayments totaled 377 million pounds. This is well below economist’s average forecast for a net 500 million pounds in new borrowing.