UK mortgage borrowing increased in February to the highest level since 2016 as the government extended the stamp duty tax holiday until the end of June, data from the Bank of England showed on Monday.
According to BoE, net mortgage borrowing was GBP 6.2 billion, the strongest since March 2016. This was also higher than the expected level of GBP 5 billion.
At the same time, the number of mortgage approvals declined more-than-expected to 87,669 in February from 97,350 in January. The expected level was 95,000.
Although approvals were down from a peak of 103,700 in November 2020, this was well above the six-month monthly average of 67,300.
“Overall, while mortgage approvals edged down in February, we suspect that mortgage lending will remain high this year given the extension to the stamp duty holiday and the strength of the survey data,” Andrew Wishart, an economist at Capital Economics, said.
As a result, mortgage approvals for house purchase are likely to reach their highest level since 2007 this year, the economist added.
Data showed that individuals continued making net repayments of consumer credit in February. Consumers repaid GBP 1.2 billion. The annual growth rate fell to -9.9 percent, a new series low since it began in 1994.
Overall, non-financial corporates repaid GBP 0.2 billion of bank loans in February. Borrowing by small and medium sized non-financial businesses was similar to recent months, as they drew down an extra GBP 0.4 billion in loans.
M4 money supply grew 0.8 percent on month, taking the annual growth to 13.6 percent in February.
Elsewhere, survey from IHS Markit showed that British households repaid debt at the fastest pace since 2009 amid squeezed savings, lower income from employment and less cash available to spend.
The Scottish Widows household finance index rose to 42.0 in the first quarter from 41.1 in the fourth quarter.
While the UK is set to emerge from lockdown in the coming months, the outlook for finances over the year ahead remained downbeat and worsened slightly since the fourth quarter of 2020.