The mortgage market has had its strongest start to a year since 2008, with lending up by 21% from January 2015.
The Council of Mortgage Lenders said that gross mortgage lending was £17.9 billion last month. This figure is 21% higher than the £14.8 billion lent in the same month last year and the highest total since the £25.2 billion lent in January 2008.
Experts said that rock bottom interest rates, cheap mortgage deals and the rush of buy-to-let investors looking to beat the April stamp duty rise had all helped to boost the market.
CML economist, Mohammad Jamei, said: “UK market fundamentals are helping to underpin this recovery, with real wage growth, an improving labour market, competitive mortgage deals, and government schemes all supporting household demand.
“We still only see limited upside potential going forwards, as the number of properties for sale on the market remains low and affordability pressures weigh on activity. Upcoming tax changes in the buy-to-let sector are adding an element of uncertainty to the market.”
Stamp duty will rise by 3% for landlords and second home owners from 1 April as part of the government’s efforts to dampen the buy-to-let market and free up property for first-time buyers.
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. The amount of tax relief landlords can claim on properties is also set to fall from April 2017.
The CML said it did expect some activity to be brought forward as buyers look to beat the rise, but it only expects a “modest” increase.
Surveyors have reported a surge in buy-to-let investors looking to beat the April stamp duty deadline. The Royal Institute of Chartered Surveyors said in its monthly report that buyer enquiries rose for the tenth successive month in January, with the near-term pressure on prices intensifying.
Brian Murphy, head of lending at Mortgage Advice Bureau, said: “Mortgage lending in 2016 started with a bang. The highest figure for a January seen since 2008 and a fifth higher than a year ago. Consumers remained in a favourable position at the start of the year, with excellent deals available thanks to rock bottom mortgage rates and a significant range of products to choose from.
“However, not all aspiring homeowners can share this rosy outlook. Some are unable to enjoy what the current market has to offer as they do not meet the affordability requirements enforced by the Mortgage Market Review. With demand in the property market hotting up, soaring house prices will further stretch homebuyer’s dreams.
“First-time buyers are too often the losers in today’s market. However, the government’s recently launched Help To Buy ISA has provided a breakthrough for those needing extra assistance in saving up for a deposit. Schemes designed to promote affordable housing will also provide an extra lifeline. In the long-term, pressure on housebuilding is key to tackling the supply shortfall and to help those priced out of the market due to high demand.”
