Mortgage borrowing plummeted in January, suggesting housing market activity is already in decline ahead of Article 50 being triggered.
According to the Council of Mortgage Lenders, home buyers borrowed £8.4 billion in January, down 28% on December and 1% from the same time last year.
First-time buyers borrowed £3.6 billion, down 29% on December but up 9% on January last year.
Home movers borrowed £4.9 billion, down 25% on the previous month and 4% for the year.
However, there was a surge in remortgaging last month, with activity up 54% to £7.1 billion.
Paul Smee, director general of the CML, said: “January gives the impression of a flattish market overall, albeit one with a resurgent remortgage sector.
“We expect a seasonal dip in activity in the winter months and this appears to be the case in January. However, the lull in moving activity appears stubbornly persistent, and we have commissioned research on the reasons why the number of transactions seems in secular decline.”
The number of buy-to-let loans taken out fell from 6,400 in December to 5,900 in January.
Landlords borrowed £800 million in January, down from £900 million in December and £1.4 billion at the same time last year.
Last year, the government increased stamp duty on second homes by 3% as part of its plans to curb the buy-to-let market and free up property for first-time buyers.
From April, mortgage interest relief for residential buy-to-let properties is set to be reduced to the base income tax rate, which is 20%.
The Prudential Regulatory Authority has also imposed tougher lending rules on the buy-to-let sector.
“Buy-to-let house purchase activity continues to be weak, despite strong buy-to-let remortgage levels. This will likely remain so going forward as lenders tighten affordability criteria ahead of the PRA mandated stress tests, and the introduction of tax changes in April,” said Smee.
Howard Archer, chief economist at IHS Global Insight, said: “The lacklustre January CML data fuels our suspicion that house price gains over 2017 will be no more than 3%, and could well be less than this.
“We believe the fundamentals for house buyers will progressively deteriorate over the coming months with consumers’ purchasing power weakening markedly and the labour market likely softening.”
Paul Smith, CEO of haart estate agents, said: “Remortgage activity surged on the month and the year, as we are seeing more and more parents on the ground looking to release equity in their homes, to support increasing numbers of young people who are leaning on their parents for support to get onto the property ladder.
“With rents sent to increase as landlords are squeezed, and ONS figures showing that house prices have reached 10 times the average salary for a third of people in England and Wales, parents are becoming increasingly concerned that their children will not have the same opportunities for home ownership that they did.
“And with no sign of any support coming from the government in the form of a stamp duty holiday, clearly it’s down to Bank of Mum and Dad to prop up levels of home ownership in the UK. Philip Hammond promised to provide young people with the same opportunities that their parents have – but we are yet to see any evidence of him delivering this.”
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