Mortgage approvals rise to highest level since 2007 but first-time buyers struggle to get on property ladder

Prospective homeowners frozen out as lenders favour borrowers with large deposits

Mortgage approvals last month jumped to their highest level in 13 years, new figures from the Bank of England show.

The housing market has bounced back as buyers go ahead with purchases that were held up during lockdown, which saw some of the slowest months.

Lenders approved 84,700 residential mortgages, the most for any month since October 2007. However, the increase only partially offset a drop in approvals between March and June.

While borrowers with large deposits have had access to a growing range of cheap mortgage deals, those with less than 25 per cent of the proprty value have been increasingly frozen out of the market.

In total, there have been 418,000 approvals in 2020, compared with 524,000 in the same period in 2019.

NAEA (National Association of Estate Agents) Propertymark reported this week that about one in eight homes sold in August went for more than the original asking price - marking the highest proportion in nearly five years.

Estate agent Savills forecasts that around a million homes will be sold this year. It raised its estimate by almost 250,000 after a mini-boom in sales after restrictions were eased and the government announced a suspension of stamp duty.

Savills forecasts that the market will favour established homeowners with substantila equity and cash buyers, Savills predicts.

Against a backdrop of job loss announcements across several industries, lenders have pulled many low-deposit mortgages in recent months as this is seen as riskier lending.

Transactions are expected to increase to over 1.2 million next year, despite weaker underlying market conditions, the report said.

Savills also set out its expectations for house prices in the coming years.

It predicted that prices across Britain will increase by 4 per cent during 2020, before flattening out across 2021.

Some experts have predicted the prospect of rising unemployment and a dwindling number of low deposit mortgages as lenders shy away from "riskier" lending will dampen the market.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said a recent increase in mortgage rates, particularly for low deposit loans, "will make purchases unaffordable for many first-time buyers".

He continued: "The outlook for a further drop in employment also will weigh on the housing market, though with home ownership having narrowed to a wealthier segment of the population over the last decade, job losses won't have as devastating an impact on the market as they did in 2008."

Additional reporting by PA Media

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