In July, households borrowed a net additional £2.7bn secured on their homes.
In July, households borrowed a net additional £2.7bn secured on their homes, according to the Bank of England's Money and Credit report.
This was up on the £2.4bn in June, but below the average of £4.2bn in the six months to February 2020.
The increase reflected a slight increase in gross borrowing to £17.4bn in July, below the pre-COVID February level of £23.7bn and consistent with the recent weakness in mortgage approvals.
The number of mortgage approvals for house purchase continued recovering in July, reaching 66,300, up from 39,900 in June.
Approvals were 10% below the February level of 73,700, but more than seven times higher than the trough of 9,300 in May.
Approvals for remortgage were little changed compared to June, at 36,000; they remained 30% lower than in February.
The effective rates on new and outstanding mortgages were little changed in July.
New mortgage rates were 1.73%, a decrease of 4 basis points on the month, while the interest rate on the stock of mortgage loans fell 1 basis point to 2.15% in July.
Hugh Wade-Jones, managing director of Enness Global Mortgages, said: “The latest rate of mortgage approvals is really quite astonishing given the dire position of the market just a few short months ago.
"There is no doubt that the huge surge of buyer demand seen once the market reopened has been seriously turbo-charged due to the stamp duty holiday announced shortly after, with the combination of both causing buyers to return to the market at mass.
"As a result, we’ve seen the number of people approved for a mortgage rebound from the depths of pandemic paralysis in May to hit almost the same levels as this time last year in just two months, with the current trajectory sure to return the market to pre-lockdown levels in no time.
"The rate of this return to form really shouldn’t be underestimated and these notably heightened levels of buyer demand should prove just the medicine for the UK property market, reversing any pandemic decline in house price growth seen during lockdown.”
Gareth Lewis, commercial director of MT Finance, said: "There are positive signs indicating plenty of consumer confidence out there as people are borrowing money.
"There are more ‘for sale’ and ‘sold’ signs springing up, and even tales of gazumping.
"August’s numbers will show even more of an uptick in transactions once the stamp duty holiday starts to filter through to the figures.
"While July’s numbers show an improvement on June, they would have been better still if transactions weren’t taking so long.
"Lenders still have staff furloughed or working from home, and it is taking them too long to process applications.
"This isn’t going to change for a while yet as they don’t have the capacity to bring everyone back to the office.
"With many surveyors only just coming back off furlough as well, this is having a negative impact on turnaround times."
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: "Mortgage approval numbers always provide a useful lead indicator of direction of travel for the property market in the coming months.
"Unfortunately, these figures relate to the period when we were emerging from lockdown but before the full benefit of the stamp duty holiday was being felt.
"Contact with mortgage brokers or lenders is not always the first thought of aspiring buyers.
"As a result, these approvals do not reflect the stronger upsurge we noticed across most property types and price ranges from the beginning of August."
