The stamp duty holiday is continuing to drive high levels of buyer demand. But with England in lockdown again, will this trend continue?

Mortgage approvals for house purchases soared to a 13-year high in September as the rush to buy a home in time to benefit from the stamp duty holiday continued.

A total of 91,500 mortgages were given the green light in September, the highest level since September 2007.

The numbers edged well above August’s tally of 84,700 approvals.

The stampede to buy homes is being driven by a combination of the government’s stamp duty holiday and people reassessing their housing needs following the first coronavirus lockdown.

The high level of demand is reflected in our latest house price index, which found that the pipeline for sales was 53% bigger in October than during the same month last year.

Why is this happening?

September is traditionally a busy month as the property market enjoys an autumn bounce, but in 2020 it has shown higher activity than usual.

The strong level of pipeline sales in part reflects demand that built up during the first national lockdown continuing to work its way through the system, while activity is also being driven by the stamp duty holiday on homes costing up to £500,000.

In addition, the pandemic has caused people to reassess their housing needs, particularly with the threat of further lockdowns looming, creates additional demand.

Who does it affect?

With the stamp duty holiday due to end on March 31, buyers who want to take advantage of it need to start house hunting straight away.

It typically takes around 100 days from an offer being accepted to a transaction being legally completed.

But the current high volume of sales going through is expected to create delays in the conveyancing process, while national lockdowns such as the ones currently imposed on England and Wales could slow things down further.

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We estimate that only 54% of sales agreed in January will have completed by the end of March, compared with 92% of those agreed in November. 

At the same time, the number of mortgage products available has halved during the past year, with just a handful of deals remaining for people with a 5% deposit and only around 50 for those with a 10% one, according to Moneyfacts.

It is not only those borrowing a high proportion of the value of their homes that are being hit, with mortgage choice falling in all but two loan-to-value brackets, including the 60% one.

There are also reports of a rise in applications being rejected, particularly for first-time buyers, as lenders become more risk-averse.

Finally, the high levels of demand mean buyers face increased competition for homes that are on the market, with many people chasing properties with the same features, such as large gardens.

What’s the background?

Going forward, buyer appetite in some areas is expected to begin to slow down as the recession and rising unemployment take their toll.

Richard Donnell, our research and insight director, said: “The strength of the market nationally is masking weakness in parts of the market where sales are slowing in areas where households are typically on lower incomes and more sensitive to economic uncertainty and more restricted credit availability.

“This market polarisation is set to become a growing feature of the market as we move in 2021.” 

Top three takeaways

  • Mortgage approvals for house purchase soared to a 13-year high in September as the rush to buy a home continued

  • A total of 91,500 mortgages got the green light during the month, the highest level since September 2007

  • The stampede to buy homes is being driven by a combination of the government’s stamp duty holiday and people reassessing their housing needs following coronavirus lockdowns. 

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