Property purchases in the UK fell 26% in the third quarter of the year, compared to the previous three months, as the government’s stamp duty holiday came to an end in September.
However, according to the latest data from UK Finance, this was still 10% higher than pre-pandemic levels in the same period in 2019, and up year-on-year.
The trade body’s quarterly Household Finance Review said the decline was “predictable and familiar” as homebuyers brought purchases forward to save money.
The data showed overall lending for house purchase was up 36% year-on-year for both first-time buyers and people moving home. The strongest growth was recorded in the northern English regions, as well as the other UK devolved nations.
Meanwhile, the higher prices in the south, most notably in the capital, meant that the exemption benefited fewer buyers, and these regions saw weaker growth.
Household spending grew by 2% compared with the second quarter of the year, with much of it spent on services including hotels, restaurants and transport, while mortgage arrears slumped overall but heavier arrears continued to rise.
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UK Finance said it was still unclear if changes in working culture, particularly the growth in remote working, will persist, with “homemover activity likely to be supported by these social drivers in a way that was not possible before COVID-19 brought about this change in mindset, both from employers and workers.”
It expects soaring inflation to bring down mortgage demand in the latter quarter of this year and into 2022.
John Phillips, national operations director at Just Mortgages, said: “After a tumultuous few months in the mortgage market, we are now getting a clearer picture of the year. While the spikes have inevitably been followed by drops in activity, the level of transactions have exceeded all expectations.
“The year is on course for the highest number of purchases since 2006. While activity has certainly been fuelled by the stamp duty holiday, the ‘race for space’ and trend for working from home also sparked people into action.”
UK Finance added on Monday that overall consumer confidence remained considerably above 2020 levels, as most sectors of the economy moved closer to normal trading conditions. But some sectors were constrained, which continues to impact households' financial decisions.
Its research also showed that the most significant development over the quarter was the final closure of the government’s Coronavirus Job Retention scheme (CJRS) at the end of September.
Provisional data suggest that as the furlough scheme ended there were over 1.1 million people still on full or partial furlough, though this was 40 per cent lower than at the end of Q2.
Eric Leenders, managing director of personal finance at UK Finance, said: “Following the end of the furlough scheme and the stamp duty holiday, activity in 2022 will inevitably be weaker than this year but an improving labour market outlook gives cause for cautious optimism.
“However, there are downside risks, including from rising inflation, which have the potential to constrain activity.
He added: “While our data shows that the vast majority of customers are managing their borrowing well, lenders continue to provide tailored forbearance and support to borrowers who need help.
“Anyone experiencing financial difficulty should contact their finance provider as soon as possible to discuss options available.”