Why is Mortgage Lending Surging?


The UK experienced a surge in mortgage lending in the first few months of 2021. Total gross mortgage lending from January to March 2021 was 26.5% higher than it was for the same period of the previous year. 

While April was the quietest month at £3bn net mortgage borrowing, down from a record £11.4bn in March, it soon bounced back with £6.6bn net mortgage borrowing in May. 


Demand is Outweighing Supply in the Property Market

Reasons For The Mortgage Boom

There are several reasons for this boom: 


Demand Outweighs Supply

During the pandemic, more people worked from home and started to reconsider their living situation. This sent house prices soaring as home movers searched for bigger houses. The vast majority of mortgages in 2021 can be attributed to home movers. 


Stamp Duty Holiday

Many buyers rushed to benefit from the stamp duty holiday due to end on the 31st of March. (It was later extended). Usually, buyers have to pay stamp duty when buying a property worth £125,001 or more in England and Northern Ireland. 

The holiday raised the threshold to £500,001, which meant that ninety percent of transactions were no longer subject to stamp duty, cutting the average bill by several thousand pounds. 


More Cash on Hand

Lockdown affected leisure activities, holiday plans, restaurants, and pubs, which meant that consumers had more cash on hand to repay credit cards and other debts. Feeling more financially secure, many Brits decided to become homeowners or to move to a different location. 


More Popular Mortgages

While conventional fixed-rate mortgages are still the most popular in the UK, representing the majority of all home loans, some mortgage brokers have started offering borrowers a 10% deposit fixed-rate terms of up to forty years. 


Low Interest Rates

The Bank of England made two interest rate cuts in 2020 to reduce the impact of the Coronavirus, which encouraged a lot of prospective homeowners to take on a mortgage. 


Interest rates will stay low in 2021


It’s good news for home buyers, with companies like HSBC and TSB offering historically low rates to lenders with large deposits. Many others are offering sub-1% deals for borrowers who can pay deposits of 40%.  


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