House purchase lending volumes in June reached the highest monthly level on record, with Q2 2021 house purchase the highest quarterly figures in 13 years, according to the Q2 UK Finance Review.
While loan-to-income (LTI) ratios for new house purchase lending increased, new borrowers remain in a strong position in the event of further economic stress, with record low monthly payments fixed for longer periods and responsible lending rules ensuring loans remain affordable.
Total levels of savings increased, but showed signs of slowing as the country reopens and savers start to spend larger proportions of their salaries on travel and leisure.
UK Finance: Mortgage arrears remain low as payment holidays come to an end
Although arrears levels remained at low levels, UK Finance reported that the winding down of the Job Retention Scheme and withdrawal of the temporary increase to Universal Credit in Q3 may cause some customers who do not return immediately to full employment to encounter increased payment difficulties.
Credit card spending and personal loan take-up increased as the hospitality and entertainment industries reopened.
However, levels remained relatively supressed, as some consumers displayed caution and international travel remained restricted.
Eric Leenders, managing director of personal finance at UK Finance, said: “There was unprecedented demand in the housing market in Q2 2021 as people sought to take advantage of the stamp duty holiday, with changes to working and living patterns encouraging more homeowners to use their existing equity, either to move further afield or to fund additional house purchases for themselves or family.
“With the holiday now in its final tapering phase, demand was expected to decline, however applications towards the end of the quarter and into Q3 remain higher than before the pandemic began, as we continue to witness the ‘race for space’.
“As COVID restrictions lifted the boost in consumer optimism was evident through modest increases in card spending and in unsecured borrowing.
“The continuing support provided by government and the banking sector for households’ impacted by the pandemic has prevented significant increases in arrears.
“As the UK emerges from lockdown and these schemes end most households will be able to resume normal payments.
“However, for those who are not immediately able to return to full employment, lenders stand ready to help with tailored support to best suit customers’ situations.”
Dave Harris, chief executive at more2life, added: “Today’s figures from UK Finance tell a compelling story around the ongoing effect of the stamp duty holiday.
“The mortgage market continued to perform well in Q2, likely a result of buyers’ eagerness to complete their purchase before the £500,000 nil-rate band for the holiday began to taper from 30th June.
“Whilst the stamp duty tax break has been instrumental in helping many first-time buyers and second-steppers lower down the property ladder, at more2life we have also seen a notable effect on older demographics at the top of the ladder taking advantage of the holiday and the versatility of a lifetime mortgage.
“With recent research showing a widening gender pension gap, property wealth is becoming an increasingly important asset for retirees, and women in particular, to augment their later life income.
“The importance of highlighting the wide-ranging and lesser-known benefits of equity release to clients, such as using or gifting the capital for a property deposit, will be drawn into sharp relief at the end of the government’s tax break when many may feel they have lost a key financial lifeline.
“Third quarter figures from UK Finance later this year may tell a very different story to today, but for now at least the numbers bear witness to the continuing strength of the UK property market as we recover from the pandemic.”
Kevin Roberts, director of Legal & General Mortgage Club, said: “The housing market continued to recover well in the second quarter of 2021, with our own data showing activity volumes continuing to break records.
“After such an uncertain period, it is fantastic to see how the market has responded to government support and that many have managed to press ahead with their home buying and selling plans and as yet little evidence activity levels will fall away to any great extent.
“However, though it is brilliant to see that those in a position to move home have done so successfully, many others have seen their financial circumstances complicated significantly by the crisis.
“People across the UK have needed to access financial support – everything from mortgage payment deferrals to income support and other benefits – and they now likely need extra help when it comes to managing their mortgage.
“This is where seeking financial advice is key, as independent mortgage brokers can help these people to keep their monthly repayments to a minimum by accessing a new deal, even if that means looking beyond the high street.”
Looking back at Q1 figures, house purchase lending surged following the rush of applications submitted ahead of the original Stamp Duty Land Tax (SDLT) holiday deadline.