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Britain's mortgage boom 'pauses' after record borrowing month

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·Senior City Correspondent, Yahoo Finance UK
·3-min read
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STOKE-ON-TRENT, ENGLAND - MARCH 03: Placards from Once Agency estates agents advertising properties For Sale and Sold on March 03, 2021 in Stoke-on-Trent, England. UK Chancellor, Rishi Sunak, announced the return of 95% mortgages to help first-time buyers. He also announced that house buyers would be exempt from paying stamp duty for a further three months with the scheme ending on 31st June 2021. (Photo by Nathan Stirk/Getty Images)
Placards from Once Agency estates agents advertising properties For Sale and Sold in Stoke-on-Trent, England. Photo: Nathan Stirk/Getty Images

Britain's mortgage boom cooled slightly in April even as house prices continue to race ahead.

New figures from the Bank of England show mortgage borrowing fell back to £3.3bn ($4.7bn) in April, down from a record £11.5bn in March. Mortgage approvals rose slightly to 86,900 and remained above pre-pandemic levels but were well below the peak of 103,400 seen in November.

The Bank of England said March's short-lived spike in borrowing was likely caused by the stamp duty holiday, which was due to end in March but has now been extended until June.

April's borrowing figure was below the six month average seen before the onset of the COVID-19 pandemic. However, gross lending remained elevated and the net figure was suppressed by unusually high repayments.

Read more: UK house price growth hits 10% in hottest month in seven years

Experts predicted the recent property market boom would continue. 

Watch: How much money do I need to buy a house?

"In a year of stonking months, including April, May was our best month yet with more mortgages submitted than at any other time of the year," said Rhys Schofield, managing director at Peak Mortgages and Protection.

"Homeownership is the real aspiration for most young people and what we are seeing in the mortgage market is a growing pool of ready-to-react first time buyers, cash rich after a year of limited spending, desperate to buy and get onto the housing ladder and invest in something rather than fritter it away on renting a property."

The new mortgage data, published on Wednesday, comes a day after Nationwide reported the strongest annual house price growth in seven years. The building society's price tracker found the average house price increased by 10.9% in May. 

Read more: Redcar and Stafford make 'best in show' top 10 for house price growth

The market has been juiced by low interest rates, a shortage of houses on the market, and excess savings built up during the pandemic.

Surging prices and mortgage activity have sparked concern at the Bank of England. Sir Dave Ramsden, a deputy governor at the central bank, this week said the Bank of England's monetary policy committee (MPC) were "closely monitoring" the housing market for signs of sustained inflation.

Andrew Montlake, managing director of mortgage broker Coreco, said: "In the past couple of weeks, the extreme lack of stock being reported from estate agents, together with buyers more focused on their summer holiday than the Stamp Duty holiday, has caused the market to pause for breath. 

"But this may only be a brief pause. We are seeing the initial skirmishes in what could be a protracted mortgage rate war."

Bank of England data also showed that households saved just over £10bn in April. That was the lowest monthly total since the pandemic began but still more than double the monthly pre-pandemic average.

Watch: Why are house prices rising during a recession?