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Mortgage approvals rise in May buoyed by stamp duty holiday extension

Gross lending and mortgage approvals rose slightly in May after the three-month extension to the stamp duty holiday gave homebuying activity yet another boost.

The Bank of England’s Money and Credit report showed a 0.7 per cent rise in mortgage approvals between April and May from 86,900 to 87,500.

Although mortgage approvals have fallen from a recent peak of 103,200 in November, they remain above pre-February 2020 levels.

Meanwhile gross mortgage lending increased by 1.3 per cent from £23.9bn to £24.2bn. Both months were considerably lower than the £35.7bn lent in March as buyers rushed to beat the original stamp duty deadline of 31 March.

However, mortgage experts expect June activity to trump May as families make one last attempt to benefit from stamp duty tax savings of up to £15,000.

Chancellor Rishi Sunak lifted the threshold for stamp duty liability to £500,000 on 8 July 2020. The temporary relief was due to end in March but buyers were granted an extension to the deadline until 30 June.

From the 1 July, the nil-rate threshold drops down to £250,000 and first-time buyer relief resumes. On the 1 October, the stamp duty holiday ends entirely and the nil-rate threshold reverts to £125,000.

Jonathan Stinton, head of intermediary relationships at Coventry Building Society, said: “We expect figures for June to be even higher, and for activity to return to more normal levels after the threshold for stamp duty has been lowered to £250,000.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, says: “Once again the timing of the ending of the stamp duty holiday had an impact on mortgage lending with a bounce back in May to reflect the extension in the concession. For many buyers, the saving has made a significant difference.

“Lenders continue to compete for business with pricing remaining hot. Santander and TSB are the latest to reprice, with the latter launching two-year fixes pegged at 0.99 per cent for purchases and 0.94 per cent  for remortgages.”

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