There was a surge in mortgage lending last month, driven by landlords looking to beat the 1 April stamp duty deadline.
The Council of Mortgage Lenders said gross mortgage lending hit £25.7 billion in March, up 43% from February.
It was the highest amount lent for March since 2007, when gross lending reached £30.9 billion.
CML economist Mohammad Jamei said: “Against a backdrop of a recovering market, the substantial jump in lending in March was significantly influenced by a late surge of activity to beat the government’s stamp duty change on second properties, which came into effect at the start of April. The distortion caused by this stamp duty change appears to be larger than any previous stamp duty change we’ve seen.
“As a result, we expect there will be about 10,000 fewer mortgaged transactions each month in the second quarter of 2016 than would otherwise have been the case, offsetting the increase in activity seen in March.”
The 3% stamp duty increase, which came into effect on 1 April, is 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.
Jeremy Leaf, a former RICS chairman and North London estate agent, said: “With the CML reporting that the real surge in activity was in the final two weeks of March as investors rushed to beat the hike in stamp duty in April, it is surprising that people left it quite so late and managed to get those purchases through just before the deadline.
“While landlords will have brought forward their buying decisions and may now not be out in such force, encouragingly there are still plenty of first-time buyers and homeowners wanting to move. This augurs well for the longer-term future of the housing market even if there are some short-term blips from buyers and sellers stunned by the stamp duty increase and made nervous by the EU referendum.”
The rush to beat the 1 April stamp duty hike also led to a sharp rise in the number of properties sold last month, new figures show.
HM Revenue and Customs reported a rise in residential property transactions of 41.5% to 165,480 from February to March.
Andy Sommerville, director of Search Acumen, said: “March saw a huge increase in the number of residential property transactions, as large numbers of prospective property investors looked to beat the implementation of the stamp duty changes.
“Transaction rates in March were much higher than anything seen since before the recession, and it is encouraging that there are signs of health in the market after some leaner years.
“However the rush is now over and we can expect activity levels to taper off somewhat in April. With the Brexit vote looming and ongoing problems in the international economy, the market is facing a degree of uncertainty, but with demand for homes far outweighing the available supply, any dip in prices and activity is unlikely to last for long.”
