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Bank of England mortgage approvals drop off in July 2021

ended 31. August 2021

British homeowners repaid £1.4 billion of mortgage debt, on net, in July 2021, according to new data published today by the Bank of England.

Net repayments are relatively rare, with only one other repayment (in April 2020) in the past decade.

The net repayment in July followed record borrowing in June (£17.7 billion), which Threadneedle Street says was likely boosted by the initial tapering off of the stamp duty holiday.

Gross lending fell to its lowest since June 2020, at £16.5 billion. Gross repayments were a little below the twelve month average, at £18.1 billion.

Approvals drop

Approvals for house purchases, an indicator of future borrowing, decreased further in July to 75,200. This is the lowest since July 2020, but remains above pre-February 2020 levels.

Approvals for remortgage (which only capture remortgaging with a different lender) rose to 37,400 in July, from 35,800 in June. This remains low compared to the months running up to February 2020.

Key points:

  • Individuals repaid £1.4 billion of mortgage debt on net in July following record net borrowing in June of £17.7 billion. Mortgage approvals for house purchase were 75,200 in July, down from 80,300 in June.
  • Consumers did not borrow additional consumer credit, on net. The effective rate on new personal loans remained low at 5.85%, but was the highest since March 2020.

Below are the views of Newspage's mortgage experts on the data. 

4 responses from the Newspage community

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"There was a natural slowdown through July and August as people went on holiday, children were off school and the first phase of the stamp duty holiday had passed. Those factors, coupled with a lack of stock available for sale, has calmed things a little. That said, it’s still very busy for this time of year, just not as hectic as the previous six months. We’ve noticed a lot of people wanting to consolidate debt into their mortgage, perhaps as a result of struggling to manage through the pandemic."

"July and August are typically quieter compared to the earlier months of the year due to school holidays, so many families' attention is diverted from house-hunting and mortgages to keeping children entertained. Saying that, demand from first-time buyers is still there, although the lack of properties for sale remains a problem. Remortgages for debt consolidation purposes have risen, especially due to the low rates currently available as borrowers look to lock into the best possible fixed rate deals to control their outgoings."

"The property market is busy and there are still lots of sales being agreed. Mortgage lenders want to provide mortgages and they have been improving their rates to tempt borrowers. Reflecting the level of competition, it's now possible to secure two and five year fixes below one per cent if you have a large deposit."

"Mortgage approvals in July and August have been particularly busy compared to previous years and it's likely to still be the impact of the ongoing reduced stamp duty relief, which runs until the end of September. There were many prospective buyers who didn't manage to secure a property in the initial stamp duty scramble but now that the competition is less feverish people who missed out are getting in quickly on new properties coming onto the market."