LONDON (CU)_Since the beginning of the pandemic in March last year, United Kingdom’s property market was grappling with the fall in demand by potential buyers whose finances were affected by the global health crisis. Therefore, in July 2020, the government of the UK decided to raise the level at which tax on property purchases to be paid from £125,000 to £500,000, with the aim providing a boost to the industry amid the pandemic.
Therefore, last month, with the deadline for the stamp duty holiday looming, mortgage approvals in the European nation recorded their highest rate of growth since 2014. According to the latest figures issued by the Bank of England, mortgage approvals in May 2021 escalated to 87,545, from 9,444 a year earlier, accounting for a growth rate of 827 per cent year-on-year.
“May 2020 marked the low point, lower than the credit crunch lows as the UK government shut the housing market, but, mortgage approvals in May 2021 were 36% above their 10-year average as a combination of pent up demand, working from home, and the stamp duty holiday gets Britain moving,” property platform Twindig’s chief executive Anthony Codling said.
Meanwhile, annual house prices in England also reported a rise which pushed average prices to a record high of £183,982, the strongest price growth in the region since 2005.
However, despite this increase, experts point out that mortgage payments have not reported a rise, particularly on account of low mortgage rates. “Despite the increase in house prices to new all-time highs, the typical mortgage payment is not high by historic standards compared to take home pay, largely because mortgage rates remain close to all-time lows – in fact, on this measure affordability remains broadly in line with its long run average, as shown in the chart below,” Nationwide’s chief economist, Robert Gardner, said.
In the meantime, the Stamp Duty Land Tax Holiday is due to expire on Wednesday (30 June), which means that starting July, the threshold will fall to £250,000 until the end of September, following which stamp duty thresholds will return to normal levels. Therefore, experts are eager to see if this runaway property market will continue its rise even after the threshold is restored.
