Mortgage lending rocketed 30% in the year to February to £17.6 billion as demand for homes remained strong, new figures have revealed.
The Council of Mortgage Lenders said that despite a 5% dip from January it was the highest lending total for a February since 2008, when gross lending reached £24.1 billion.
CML economist, Mohammad Jamei, said: “This growth rate is in line with what we saw in the closing months of 2015. The recovery is being underpinned by market fundamentals in the UK, as wages grow and unemployment falls, helped by government schemes and competitive mortgage deals.
“But we think it unlikely that there will be any significant acceleration in lending. While there may be a slight current boost to lending as some transactions seek to complete before the 1 April tax changes in the buy-to-let-sector, this is likely to be followed by a slight fall in activity. Affordability pressures continue to weigh on activity, as does the low number of properties coming on the market, though this has been improving very recently.”
The 3% increase on stamp duty is set to take effect from 1 April as part of the government’s attempt to curb the buy-to-let market and free up property for first-time buyers. The basic rate of tax relief landlords can claim on properties is also set to fall to 20% from April 2017.
Under the changes, the stamp duty on a £250,000 buy-to-let property will rise from £2,500 to £10,000, while the rate for a £400,000 property will more than double from £10,000 to £22,000.
Jeremy Duncombe, director of Legal & General Mortgage Club, said: “Lending continues to experience a year-on-year rise as many homeowners are forced to take out larger loans to cope with increasing house prices. These high prices combined with a lack of affordable housing puts owning a property out of reach for many first time buyers.
“Additional housing needs to be built up and down the country as an increasing amount of potential buyers are left to fight over fewer and fewer properties. Initiatives that can aid the delivery of the 250,000 extra homes needed annually should be thoroughly explored by the government, with all options considered. As the Chancellor himself conceded in his Budget, more needs to be done to speed up the realisation of these new properties if the housing market and the wider economy is to return to full health.”
Brian Murphy, head of lending at the Mortgage Advice Bureau, said: “Borrowers and lenders alike clearly have an appetite for business.
“Rock-bottom mortgage rates have played a key role in driving this increase, giving those who meet affordability criteria a boost onto the property ladder. With the base rate going nowhere fast, consumers should continue to reap the rewards of these low rates for some time. Existing homeowners also stand to benefit, with borrowers on their lenders’ standard variable rate able to make significant savings by swapping to a new deal.
“While it is good to see the mortgage market is able to support more borrowers in spite of rising house prices, policymakers need to ensure the market remains open to those with more modest incomes. Supporting would-be buyers’ aspirations through a Lifetime ISA is certainly helpful for those trying to raise a deposit, but the market is desperate for a comprehensive housebuilding programme to address supply-side issues. If the current imbalance is not addressed, property prices will climb out of reach for some borrowers.”
