U.K. Mortgage Approvals Post Best Year Since 2007 on Tax Cut

U.K. lenders approved more mortgages in 2020 than in any year since before the financial crisis, as house hunters sought to take advantage of a temporary tax cut.

The stamp duty holiday, which allows buyers to save as much as 15,000 pounds ($20,000), propelled the housing market into high gear even as the coronavirus crisis sent the wider economy into its deepest slump for three centuries.

The jump is partly down to pent-up demand from the first lockdown last spring, when the market was largely shuttered and mortgage approvals collapsed. However, analysts expect housing to slow in 2021. The tax break expires soon, unemployment is rising and new restrictions on work and social interaction that are set to run through at least March.

Lenders approved 103,381 loans in December, compared with a revised 105,324 in November, the Bank of England said Monday. The median forecast among economists was for 100,000. It left the total for 2020 at 818,537, the highest since 2007.

By contrast, limited opportunities to spend during successive lockdowns saw consumers repay 16.6 billion pounds of unsecured debt last year, the most since annual records began in 1994. December alone saw 965 million pounds of mostly credit-card debt paid off.

The repairing of household balance sheets leaves households in a strong position to spend once restrictions are lifted, potentially giving a strong boost to economic growth. Almost 21 billion pounds piled up in personal bank accounts in December, even more than in November when the country was under a partial lockdown.

Large business repaid debt in December but small firms were forced to add to their borrowings to survive, the BOE figures also showed.

Separately, the IHS Markit manufacturing purchasing managers index dropped to a three-month low in January.

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