The Bank of England’s monthly money and credit statistics report shows that the number of mortgages approved for UK house purchases in October 2020 was 97,400, which is the highest monthly figure since September 2007.

The total number represents a rise of 6% from the 92,100 approvals reported in September. Approvals have also risen more than tenfold since the low point of 9,400 in May 2020 at the peak of the Covid-19 first wave, but approvals are also 33% higher than in February 2020, which was before the effects of the pandemic began to be felt.

Approvals for re-mortgages with new lenders remain below the levels seen prior to the pandemic. The total number of re-mortgage approvals in October was 9,400, which was similar to September’s figure, and this figure is around 40% lower than the volumes of re-lending seen in February 2020.

Net mortgage borrowing for October was £4.3 billion, which was actually lower than September’s figure of £4.9 billion. The lowest monthly figure seen here this year was £200 million, which occurred in April, and net monthly borrowing has now recovered to pre-Covid levels when you consider that average net monthly borrowing in the six months to February 2020 was £3.9 billion.

Effective interest rates on new mortgages taken out in October were 1.78%, an increase of 0.04% from the previous month. These rates are still slightly below the 1.85% seen in January of this year. Effective interest rates on all mortgages currently stand at 2.12%, and this figure is little changed since September.

The data also shows that the consumer credit market remains weak, with many consumers continuing to prioritise paying down debt – total net repayments on consumer credit debts were £600 million in October, including net repayments of £400 million on credit cards. UK households have repaid £15.6 billion of debt since March of this year.

The annual growth rate for the credit market is now minus 5.6%, which is the lowest recorded figure since records for this started to be kept in 1994.

Effective rates on new personal loans averaged 5.15%, which is an increase of 37 basis points when compared to September but is still somewhat lower than the 7% figure reported in the early months of the year.

Aneesh Varma, founder and chief executive at Aire, which provides credit assessment services, commented:

“Levels of consumer borrowing on credit cards have fallen by almost a fifth since before the pandemic. Lenders might reasonably expect these levels to tick up again during November and December as people put Christmas on credit.

“The fundamental challenge for lenders is that the impact of Covid-19 is not equal. Some people with spotless credit histories and healthy savings going into the pandemic are now defaulting on their credit commitments through no fault of their own, while others have more disposable income now.”

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