Bank of England Money and Credit Report March 2021

"While the property boom shows no signs of abating yet, there remains an inconvenient truth: a lot of demand and a lack of new property coming onto the market, be it new or second-hand. "This supply problem, which predates the pandemic, will take more than Government incentives such as Stamp Duty holidays or 5% deposit schemes to resolve if new homes aren't being built. "Increasingly, we will see a culture of improve rather than move. People are increasingly investing in their current homes, either to create another room or to improve their bathroom or kitchen, but in all cases to give themselves additional space and create a more pleasant environment. That will almost certainly continue throughout 2021."

"There's no doubt the pandemic has allowed many consumers to get on top of their finances and pay down debt, as they have had more surplus income because of reduced spending due to the various national lockdowns. "This extra liquidity, combined with the introduction of the Government mortgage guarantee scheme, means demand is likely to remain high, especially among first-time buyers. Supply is likely to reduce even further as a result. "Both March and April were extremely busy months in terms of mortgage approvals but supply has diminished sharply. "Desperate buyers are increasingly being forced to pay over the odds or settle for less desirable properties. We are seeing a rise in the number of lender down-valuations as a result of this."

"While the market remains very active, we are already starting to see the implications of the June Stamp Duty cliff edge. Yes, mortgages are being agreed in huge numbers but that doesn't necessarily equate to completed sales. We are already seeing solicitors refusing to take work on where the buyer is expecting them to complete in time. "It's impossible to predict what will happen during the rest of the year in terms of demand for property. While we are hopeful that some normality will return to large parts of our lives, the issue of cheap money chasing too few assets still remains. "Given that 4.9m people are still on furlough, and we have a Covid bill that could even dwarf Downing Street's recent refurbishment costs, a little pause in consumer exuberance wouldn't go amiss. "People have saved more in the pandemic but only because they had nothing else to spend it on. Many have reinvested the savings into their property or into themselves via a Peloton, and there will undoubtedly be an economic bounce throughout the summer. "A 12-month spending sabbatical will have very little long-term impact on an eat-as-much-as-you-want debt buffet that is now well over 20 years old."

"Since the pandemic began, a lot of people have definitely managed to reduce their non-essential outgoings and clear debts such as credit cards and personal loans. Those looking to buy have also managed to save bigger deposits. "In recent months, there has been an incredible demand for property and this, coupled with a drastic shortage of properties available to buy, is driving house prices ever higher. The new Government guarantee scheme for 95% loan-to-value mortgages is adding fuel to the fire. "In some cases, people are buying properties not because they really want them but for the simple fact they are available. That's how competitive it is out there."