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Property market 'up a gear' as UK mortgages hit 10-year high

Sajid Shaikh
Digital finance editor
Close to a million mortgages were approved by UK high street banks last year. Photo: Getty

UK banks have approved the highest number of mortgages in 10 years, according to the latest data from industry group UK Finance on Monday.

Figures show 982,286 mortgages were approved by high street banks in 2019, 7.4% more compared with 2018, and amounting to total lending of £265.8bn ($203bn).

2019 also marked the highest annual total for mortgage approvals since 2009 — when 986,742 home loans were handed out — suggesting the property market is primed for ascendancy.

UK Finance said more than half a million (507,789) mortgages in 2019 were for house purchases, the highest annual level since 2015.

Seasonally adjusted figures also show that 46,815 loans for house purchases were approved in December — the highest monthly total since August 2015.

READ MORE: UK house prices rise at fastest pace in 18 years

Howard Archer, chief economic adviser at forecasters EY ITEM Club, said: “December’s jump in mortgage approvals adds to a growing amount of firmer data and survey evidence suggesting that the housing market could well be changing up a gear.”

Last week estate agent Rightmove’s house price index showed UK property prices rising at the fastest monthly rate in 18 years. The index recorded its biggest ever monthly leap in asking prices, which came in at £306,810 in January, about £6,785 higher than a month earlier.

Archer also said that while the housing market may get a further near-term boost from reduced uncertainties, EY remained relatively cautious over housing market prospects for 2020 and suspects that the upside will likely be limited.

“Nevertheless, we have modestly raised our forecast for house price gains over 2020 to 2.8% from 2.0%, and there is a possibility that they could rise more than this. This partly reflects the fact that we have also modestly raised our UK GDP growth forecast for 2020 to 1.2% from 1.0%.

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“Housing market activity — and possibly to a lesser extent prices — could be given a modest lift in 2020 if the government introduces specific measures aimed at boosting the sector in the Budget on 11 March,” Archer said.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The jump in mortgage approvals in December likely solely reflects the stimulus provided by the sharp fall in mortgage rates in the second half of last year. The additional boost to approvals from the result of the general election still is to come.”

He said all the evidence so far points “to a further rise in demand after the election; the new buyer enquiries balance of the RICS Residential Market Survey leaped in December to its highest level since January 2019.”

Source: Pantheon Macro

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “2019 turned out to be a strong year for the mortgage market, even with disruptive headwinds caused by Brexit and a general election. Lenders remained keen to lend and offered the rock-bottom mortgage deals to prove it.

“With transactional levels low, many lenders didn’t do as much lending as they would have liked, which means there is plenty of cash left in the pot for this year.”

In November, data from the Office for National Statistics showed Britain’s construction industry had rebounded at the fastest pace in a year for the month. Output leapt by 1.9% in a month to £13.8bn, the biggest monthly jump since January 2018. The ONS data pointed to a £135m surge in the value of private housebuilding projects to more than £3bn of work in November.

Ben Johnston, director of Houso, the off-market property app, said: “The market is moving in the right direction... but more emphasis is also needed on the government sorting out stamp duty in the budget so that it is at a more acceptable level to encourage downsizers and second steppers into the move which has been paused for the best bit of five years.”

Jeremy Leaf, a north London estate agent and a former RICS residential chairman, said: “The extent of any post-election ‘bounce’ will probably be determined not only by an ability to match buyer and seller expectations but early clarification of the UK’s future trading relationship with the EU.”

READ MORE: Housebuilding boom helps construction grow at fastest pace in a year