£1.4 billion net mortgage repayments witnessed after record borrowing in UK households

Record of mortgage repayments in the United Kingdom

Following a record spike in borrowing in June when homebuyers hurried to take full advantage of a tax cut, British families made a rare net payback of mortgage debt last month, according to Bank of England statistics released on Tuesday. In July, personal borrowing fell by 42 million pounds ($57.8 million), the lowest level since February of this year, when the UK was under a third coronavirus lockdown.

In a Reuters survey of economists, the median prediction was for a rise of 441 million pounds. According to a Reuters survey of experts, mortgage borrowing increased by 3.1 billion pounds in July. Other indicators of a slowdown in economic activity were seen in July, when many businesses were dealing with personnel shortages exacerbated by the outbreak of the Delta coronavirus and rigorous self-isolation restrictions that have since been loosened.

The Bank of England figures released on Tuesday also revealed that net mortgage repayments totaled 1.4 billion pounds in July, only the second time in the last decade that repayments exceeded borrowing following an all-time high of 17.7 billion pounds in net borrowing the month before. The tax benefit for purchasers, which was part of finance minister Rishi Sunak’s package of emergency measures to boost Britain’s economy during the coronavirus outbreak, fueled the increase in June.

The pandemic has caused an increase in mortgage approvals

The first 500,000 pounds of any real estate acquisition in England or Northern Ireland was free from stamp duty until the end of June under the tax incentive program. In Scotland and Wales, similar measures were proposed. In England and Northern Ireland, a 250,000 pound tax-free allowance is now available until the end of September.

According to the Bank of England, British lenders granted 75,152 mortgages in July, the lowest number in almost a year. According to a Reuters poll of economists, there were 78,600 approvals. Despite the fact that the number of new mortgage approvals fell from 87,000 to 83,000 in March, they were still greater than the 73,000 reported in February 2020, the final month before the UK entered its first pandemic-induced lockdown.

In March, net mortgage lending reached £11.3 billion, the highest monthly total since the series began in 1993. Customers continued to settle credit card debts despite lockdown measures impacting bars, restaurants, shops, and other recreational activities, with the Bank reporting net repayments of £500 million in March.

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