The housing market has slowed down dramatically following the end of the stamp duty holiday in June but larger structural changes to the market could be in play, say commentators.
Figures from the Bank of England showed individuals borrowed £5.3 billion of mortgage debt in August, compared to a record £17.7 billion in June. The BoE said August was £1.4 billion below the 12 month average to June 2021.
Mortgage approvals for house purchases, an indicator of future borrowing, also fell to 74,500 in August from 75,100 in July. It marked the lowest level since July 2020 but remained above pre-February 2020 levels.
Karen Noye, mortgage expert at Quilter, said: ““While clearly the housing market is starting to flag after the removal of some of the government schemes such as the stamp duty holiday, it has not crashed as some predicted.
“Clearly these measures have inflated house prices and caused a flurry of activity in the market, but the number of mortgage approvals still remains higher than pre-pandemic levels showing that there could be larger structural changes to the market in play.
“ONS figures showed that house prices in rural and coastal regions had increased at higher levels than the rest of the country, illustrating that people’s taste in housing may have been fundamentally altered by the pandemic. Prospective buyers are now looking for more than just proximity to their workplaces and are happy to live further out to appreciate more space and access to the countryside or seaside.”
However, Noye warned that a resurgence in the Covid-19 virus coupled with a surge in living costs due to gas shortages could alter the landscape.
She added: “The next few months may be turbulent and could heavily impact what happens as we approach the end of 2021.”
Laura Suter, head of personal finance at AJ Bell, commented: “Some of the heat is coming out of the housing market after a pandemic-fuelled drive for space and the Government stamp duty cut put the rockets under the market.
“Approvals for house purchases show a slight reduction on the past year but are still above pre-pandemic levels. Rather than seeing a total drop off a cliff, as many have feared, it’s likely that the housing market will just gradually slow down as the final end of the stamp duty holiday arrives and many of the people who wanted to move in the race for space will have done so.”
