The number of property purchases were 26% lower than the previous quarter, but 10% higher than pre-pandemic levels in Q3 2019, according to the latest data from UK Finance.
Overall, lending for house purchase in Q3 was strong – some 36% up year-on-year for both FTBs and movers. However, there was wide variation across regions. In the third and final phase of the stamp duty holiday, the exemption mainly benefited lower-priced properties. Accordingly, the strongest growth was seen in the northern English regions, as well as the other UK devolved nations.
Meanwhile, the comparatively higher prices in the south, most notably the capital, meant that the exemption benefited fewer
buyers and these regions saw commensurately weaker growth.
In Q4, with the stamp duty rates reverting to the pre-Covid-19 regime, we would expect to see some normalisation of growth across the country.
With the stamp duty holiday now completely phased out (as of 1 October), along with all other Covid-19-related support and incentive measures, we can look to activity in Q4 as the first without any of these distorting impacts.
The volume of mortgage applications submitted to lenders in Q3 indicates that lending in Q4 – when most Q3 outstanding
applications will complete – will still be in annual growth territory, albeit modest compared with the previous two quarters. This suggests that the strength in the market has continued beyond the end of the stamp duty holiday.
Eric Leenders, managing director, personal finance, said: “Consumers continued their return to business-as-usual in Q3 2021, with a further increase in household spending and particular strength in the mortgage market in the final phase of the stamp duty holiday.
“Following the end of the furlough scheme and the stamp duty holiday, activity in 2022 will inevitably be weaker than this year but an improving labour market outlook gives cause for cautious optimism. However, there are downside risks, including from rising inflation, which has the potential to constrain activity.
“While our data shows that the vast majority of customers are managing their borrowing well, lenders continue to provide tailored forbearance and support to borrowers who need help. Anyone experiencing financial difficulty should contact their finance provider as soon as possible to discuss options available.”
Nigel Purves, CEO of Wayhome, added: “The evidence speaks for itself – home movers disproportionately benefited from the Government’s support through the pandemic, while would-be first-time buyers were hung out to dry.
“The first rung of the property ladder is getting further and further away – salaries have fallen behind inflation, meaning even those in full-time work face needing to save for more than fifteen years for a deposit. Once they’ve got that deposit, restrictive lending criteria means getting a mortgage is still no mean feat.
“The current landscape is unsustainable; homeownership shouldn’t be an impossible dream – we need radical change in the property market to make it a reality for more people.”
Richard Pike, Phoebus Software sales and marketing director, said: “The housing market in 2021 has seen some dramatic highs both in terms of mortgage activity and house prices. The levels we saw over the summer were of course unsustainable, not least because of supply. However, as things settle down to a more normal rhythm the key for borrowers will be managing their finances. With that in mind, we are likely to continue to see the number of remortgages continue to increase.
“The potential for an increase in mortgage arrears in the coming months is one that lenders will need to manage well. As the Bank of England looks to loosen mortgage stress-test rules more borrowers could be able to get onto the property ladder, but after seven years under the current rules, interest rate rises on the horizon and the cost of living increasing, will lenders continue to loosen lending criteria?”
John Phillips, national operations director, Just Mortgages, concluded: “After a tumultuous few months in the mortgage market, we are now getting a clearer picture of the year. While the spikes have inevitably been followed by drops in activity, the level of transactions has exceeded all expectations.
“The year is on course for the highest number of purchases since 2006. While activity has certainly been fuelled by the stamp duty holiday, the ‘race for space’ and trend for working from home also sparked people into action.
“Restrictive criteria for borrowers have been easing throughout the year. Perhaps this is best demonstrated by lending to self-employed borrowers. The latest data shows lending has been very similar to those for lending to self-employed and employed borrowers, and this is encouraging for the future.
“Looking ahead to 2022, demand should remain strong, but there will be less urgency for transactions. With the current imbalance in buyers and sellers, prices look set to continue increasing. However, we may reach a point where some begin to question value for money and put plans on hold.”
