How the housing market defied all the odds in 2020 with mortgage approvals the highest since 2007

It was the beginning of a new decade, yet the year was quickly shaped by a global pandemic. The housing market for the first quarter showed signs of growth which were quickly quashed with the first UK lockdown. However, after a cautious reopening in mid-May the market flourished to levels unheard of for over a decade.

Earlier this year, figures from the Bank of England showed the number of mortgages approved by banks and building societies for home purchases had leapt to 105,000 in November – the highest figure since August 2007.

The two biggest factors for the housing market to perform so well despite the global pandemic was the SDLT (Stamp Duty Land Tax) holiday and people reassessing their living priorities because of the virus. Furthermore, several buyers have been in a position to save money throughout the pandemic allowing them to pursue properties in a higher price bracket.

What’s more, since the SDLT holiday was announced property prices increased month on month until the end of 2020. In December alone, the UK average house prices over the year increased by 8.5%, up from 7.1% in November 2020, to stand at a record high of £252,000; this is the highest annual growth rate the UK has seen since October 2014.

Annual house price rates of change for all dwellings, UK: Aug 2020 to December 2020

2020 Aug 2.7
2020 Sep 4.4
2020 Oct 5.8
2020 Nov 7.1
2020 Dec 8.5

Source: HM Land Registry, Registers of Scotland, Land and Property Services Northern Ireland, and Office for National Statistics – UK House Price Index

There’s an argument that the temporary tax relief available to buyers has helped incentivise their need to move. However, it remains to become clear what will happen to the housing market once the SDLT threshold reverts to its former chargeable rate of £125,000 for residential properties.

Here at Enact, we have had a 57% increase in new instructions this February compared with February 2020. Therefore, worries that transactions would fall off a cliff edge at the end of the stamp duty holiday have yet to be proven.

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