The average amount that homeowners looked to borrow increased from just above £170,000 in August 2019 to approximately £190,000 in August 2021, according to new data from Trussle.
The online mortgage broker believes a number of factors have likely led to homeowners seeking larger mortgages, such as declining interest rates which offer better deals for buyers. In addition, research shows that while there has been little change in household income during coronavirus, households did decrease their spending on non-essential items over lockdown. As a result, savings as a proportion of household disposable income increased during the coronavirus lockdown from January to March 2021.
The Stamp Duty holiday was also clearly a key driver in people’s ability to afford larger mortgages. Trussle’s data shows that when the holiday was announced there was a huge uptick in the loan amounts homebuyers were seeking. In just two months between June 2020 (£179,755) and August 2020 (£200,104) the average amount borrowed soared by over £20,000.
In addition, the effect of the Stamp Duty Holiday was not short lived. Mortgage borrowing amounts continued to increase during 2020 and into the new year. In May this year, the average mortgage loan size for Trussle customers reached a 24 month high of £210,057.
Miles Robinson, head of mortgages at Trussle, said: “People have been incredibly sensible during the pandemic and as a result households’ savings have grown considerably. This, coupled with incentives like the Stamp Duty Holiday and lower interest rates, has meant that home buyers have had much more flexible budgets when it comes to finding their perfect home.
“However, we shouldn’t presume that buyer appetite for bigger mortgages is here to stay. As the UK continues on its path to reopening, spending on non-essential items will understandably begin to increase again, As such, homebuyers’ savings will likely begin to shift back towards pre-pandemic levels and mortgages will shrink accordingly.”
