UK Finance reports Q1 surge in lending

House purchase lending surged in the first quarter of 2021, new data published by UK Finance has revealed.

This was following a rush of applications submitted ahead of the original stamp duty holiday deadline at the end of March, before it was extended to June.

UK Finance’s Household Finance Review for Q1 indicated that home mover activity was particularly strong, with evidence of many homeowners using substantial existing equity stakes to move to larger properties away from city centres, in response to changing working and living patterns

The report suggested that a “peculiar consequence” of the pandemic has been the rebalancing of the housing market, in a way that market intervention has not previously achieved.

The banking body highlighted that the marginal benefit of the stamp duty holiday accrues mostly to home movers and landlords, while the majority of first-time buyers across the UK were already exempt through the specific holiday which had been in place since 2017.

Commenting on the findings, Hope Capital CEO, Jonathan Sealey, said: “As the report highlights, the quarter started with the country in lockdown and as a nation we dug deep to protect finances, but at the same time took advantage of the opportunities offered through support such as the stamp duty holiday.

“There are also signs that the impact on economic output wasn’t as severe as first feared with sectors such as construction, faring better following the key decision to keep building sites operating through lockdown.

“By the end of the quarter positive momentum had built around the vaccine rollout which has really turned the dial coming into the second quarter.”

Phoebus Software sales and marketing director, Richard Pike, added: “This retrospective view of the first quarter of 2021 throws up no real surprises, however it is interesting to note that first-time-buyer numbers were outpaced by home movers across the country in Q1.

“This perhaps shows the effect that the stamp duty holiday was having, encouraging a different sector of the market to take advantage, when first-time buyers already had the benefit of SDLT holiday. It also shows the movement across the regions as quality of living became a priority during the pandemic.”

Elsewhere, UK Finance also revealed that credit card borrowing fell in Q1 due to “additional national lockdowns and post-Christmas seasonality”. The figures showed that total spending in the quarter declined by 17% from the previous quarter, and fell by 24% compared with Q1 2020, with decreases concentrated in the same lockdown-sensitive sectors.

However, borrowing did increase at the end of the quarter to reach £14.2bn, which compares with a total of £10.7bn at the start of the quarter in January 2021, and £8.7bn at the peak of the first UK lockdown in April 2020.

Just Mortgages and Spicerhaart national operations director, John Phillips, commented: “While the stamp duty has certainly spurred a few into action, the figures show credit card borrowing fell, and deposits in savings have increased significantly in Q1 and both of these are helping fuel the current rush for properties.

“One potential indicator for the future of the housing market is the increase in credit card spending towards the end of the quarter. With hospitality opening back up, and international travel set to return, this may result in some choosing to spend on holidays and socialising, putting house buying on the back-burner for a month or two.”

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