The housing market has made a remarkable bounce-back since the onset of the pandemic, with initiatives such as the stamp duty holiday and 95% mortgage guarantee scheme encouraging people to move home more than ever.
With the release of pent-up demand from the previous lockdown causing a surge of buyers, mortgage lending in the first quarter of 2021 hit its highest point in 14 years, according to the Bank of England (BoE).
Below, we analyse the recent findings and how the revolution of mortgage lending can affect property buyers and sellers in the market.
Mortgage lending trends since 2007
The figures from the Bank of England reveal that the value of gross mortgage lending in Q1 2021 reached £83.3 billion. This is 26.5% higher than in Q1 2020, and the highest level since 2007.
Lenders agreed to advance £77.5 billion of mortgages in the first quarter – a 15% increase on last year.
Interestingly, the proportion of mortgage deals with interest rates of less than 2% above the Bank Base Rate fell by 13% year-on-year, highlighting that although deals are cheaper, rates remain higher than a year ago. However, this may change with the introduction of the mortgage guarantee scheme.
Meanwhile, 1.1% of all mortgages advanced in Q1 were above 90%, the lowest proportion since 2007.
The data also shows house purchase advances accounted for just over 64% of all lending in Q1 – an increase of 17.3% compared to the same period last year.
What does the 95% mortgage scheme entail?
Initially announced at the March Budget and launched in April 2021, the 95% mortgage scheme is designed to help home buyers secure a mortgage with a 5% deposit.
Under the terms of the scheme, the government will offer lenders the guarantee they need to provide mortgages that cover the other 95%.
The mortgage guarantee scheme intends to support a new generation in ‘realising their dream of home ownership’, in line with the government’s ambition to turn ‘Generation Rent’ into ‘Generation Buy’.
The new scheme is not restricted to first-time buyers or new-build properties and apply to purchases up to £600,000. We recently covered the launch of the scheme, which you can view here.
What does increased lending mean for buyers and sellers?
Although increased lending should be treated with caution, particularly during the pandemic, more 95% mortgages could provide a much-needed boost for the property market.
There is an obvious benefit for first-time buyers, who can enter the property market without having to save as much money. This, coupled with the stamp duty holiday, means they are in an even better position to fulfil their dream of stepping onto the property ladder much sooner.
This has knock-on benefits for the sales market. If more buyers are interested in a seller’s property, the chances of selling quickly and for the best possible price are increased.
If, as a seller, you are looking to buy and sell a property at the same time, the mortgage guarantee scheme could provide you with an opportunity to purchase a more expensive property with a lower deposit.
Meanwhile, the buzz provided by the scheme could encourage more buyers to enter the market. As a result, demand for your home could be higher which could lead to more viewings and offers.
Here at Kings Group, we can assist you through your buying and selling journey in Essex, London and Hertfordshire. For more information on our services, please contact one of our branches today. We also offer a free and instant online valuation to give you an idea of how much your home could be worth on the current market.
