Mortgage borrowing has risen sharply in the past year to its highest level since 2008, driven by investors looking to beat the 1 April stamp duty deadline.
According to the British Bankers’ Association, gross mortgage borrowing was £17.1 billion in March, 64% higher than a year ago.
British banks approved 45,096 mortgages for house purchases in March, down from 45,646 in February.
The number of mortgage approvals in March was 20% higher than a year ago, with remortgaging up 25% and house purchase up 14%.
Unsecured borrowing by households is growing at around 6% per annum, reflecting low interest rates and relatively strong household finances.
Dr Rebecca Harding, chief economic advisor at the BBA, said: “A surge in buy-to-let and second home buying ahead of the new stamp duty surcharge in April led to a sharp rise in March’s gross mortgage borrowing as people brought transactions forward.
“For households more widely, consumer credit continues to grow above real earnings growth, as improving consumer confidence and low interest rates combine to stimulate borrowing demand for personal loans, cards and overdrafts.
Charlotte Nelson, finance expert at Moneyfacts.co.uk, said: “The fact that mortgage borrowing has increased year-on-year yet again is likely to be the result of falling mortgage rates across the market. For example, the average two-year fixed mortgage rate has decreased from 2.97% to 2.55% in just 12 months, while the average five-year fixed rate has dropped from 3.53% to 3.19% over the same period.
“The buy-to-let market has seen a similar trend in rates and borrowing: the stamp duty changes triggered a surge in buy-to-let borrowing, which prompted providers to drop their rates in order to catch the attention of would-be landlords. For instance, the average two-year fixed rate for buy-to-let mortgages fell from 3.59% to 3.29% in just one year while the average five-year fixed rate dropped significantly from 4.37% to 4.00% over the same period.
“Buy-to-let investment certainly has its advantages, but anyone seeking to enter this sector should remember that it’s not without its risks. Interested borrowers would therefore be wise to seek the advice of an independent financial adviser to find out if this is the best investment for them.”
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