Rush to beat stamp duty deadline drives mortgage borrowing to record high

A rush to complete house purchases before the tapering of the stamp duty holiday at the end of June drove mortgage borrowing to a record monthly high, reveal new figures published today.

The Bank of England said mortgage borrowing hit £17.9bn in June, surging 163 per cent in just a month from £6.8bn in May.

Read more: House prices to surge another £50,000 over next five years

In July last year, chancellor Rishi Sunak increased the threshold at which tax on property sales applies to £500,000 from £125,000, stoking demand in the housing market as prospective buyers rushed to capitalise on the tax savings.

The holiday was intially scheduled to finish at the end of March this year, but Sunak extended it to the end of September, and announced it would taper to £250,000 on 30 June.

As a result, homebuyers have been pushing to complete before the June change.

Chris Sykes, mortgage consultant at Private Finance, said: “Almost everyone purchasing in the first 6 months of this year were aiming to complete by the stamp duty holiday tier end.”

House prices fell 0.5 per cent in July, the first monthly drop since March, the month that the holiday was first pencilled in to end, according to Nationwide.

Sharp prices over the last year have largely cancelled out any savings buyers have made from lower tax bills. Annually, house prices have risen 10.5 per cent, and analysts at estate agent Savills expect them to rise a further £50,000 over the next five years.

Bank of England data also showed that mortgage approvals cooled over the last month, down six per cent to 81,300 from 86,950 in May.

The fall is likely to have been driven by “the notion that most buyers would have struggled to complete in time if their mortgage was not approved until June,” according to Martin Beck, senior economic adviser to the EY Item Club.

Read more: The rise in house prices slows after stamp duty holiday ends

Households increased deposits by £9.8bn over the last month, higher than May’s £7.3bn increase, indicating that savings habits picked up during the pandemic could persist, which may dampen consumer spending and slow the economic recovery.

Consumers repaid £100m in credit card debt, providing further evidence that spending in June may have cooled after consumers rushed to high streets, pubs and restaurants after the easing of Covid restrictions in May.

“Consumers are clearly some way from returning to normal spending patterns,” Beck warned.