Mortgage demand increased sharply and consumer borrowing rose for the first time in five months as the UK emerged from its Covid-19 lockdown in July, the Bank of England has said.
The latest Threadneedle Street data showed the number of new home loan approvals jumped from 39,900 in June to 66,300 in July.
With activity spurred by the release of pent-up demand and a stamp duty holiday included in the package of measures announced by the chancellor, Rishi Sunak, the Bank said mortgage approvals were running just 10% below their pre-crisis level.
The severity of the lockdown, which led to the closure of estate agents and prevented potential buyers from viewing homes, resulted in the property market coming to a virtual standstill, with the number of mortgage approvals reaching a trough of 9,300 in May.
The gradual lifting of restrictions on the economy from May onwards also had an impact on demand for consumer credit, such as overdrafts, unsecured loans and credit card spending.
The Bank of England figures showed that after a cumulative repayment of debt between March and June totalling £15.9bn, net borrowing in July of £1.2bn was similar to the average of £1.1bn a month in the 18 months leading up to the lockdown.
The weakness of demand for consumer credit between March and June meant the annual growth rate remained negative at -3.6% despite July’s increase in borrowing, and was the weakest since the series began in 1994. Net borrowing on credit cards was £600m, and other forms of consumer credit also rose £600m in July. The annual growth rates both remained negative, at -10.6% and -0.3% respectively.
The Bank of England also found that borrowing by non-financial companies stood at £4bn in July, close to pre-Covid levels, after hitting a peak of £31bn in March.
Simon Gammon, a managing partner at Knight Frank Finance, said: “It’s clear from the strength of the recovery that the cut to stamp duty is working as intended and we can expect a sustained period of robust and competitive sales activity.
“The future trajectory of the recovery will depend on how many people lose jobs at the end of the furlough scheme. Beyond that, the reduced stamp duty rates are due to end in March, and we’re likely to see a bottleneck of transactions build up in the run-up unless the government opts for an extension.”