Gross mortgage lending hits biggest level for 9 years

Latest figures released from The Council of Mortgage Lenders show March saw gross mortgage lending total £25.7bn.

This was driven by buy-to-let landlords rushing to complete deals before the additional 3% stamp duty surcharge came into play on April 1^st.

Increases

The surge amounted to a 43% month-on-month increase in comparison to February. What’s more, mortgage lending was up 59% greater than in March 2015 and the highest figure seen in the month since 2007, where lending hit £30.9bn.

Gross mortgage lending in the first quarter of 2016 was approximately £62.1bn. This is 39% higher than in the first three months of last year.

Economist at the Council of Mortgage Lenders, Mohammed Jamel, 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.’[1]

‘As a result, we expect there will be about 10,000 fewer mortgage transactions each month in the second quarter of 2016 than would otherwise have been the case, offsetting the increase in activity seen in March,’ Jamel added.[1]

House price spike

Jeremy Duncombe, Director at Legal & General Mortgage Club, commented, ‘whilst these latest figures from the CML may seem to suggest that more people are securing mortgages, this rise in lending is actually the result of ever-increasing house prices.’ He feels, ‘the reality is that today’s buyers are being forced to borrow more to cover the cost of their home, which is artificially inflating lending figures.’[1]

Duncombe went on to say, ‘if we want to see lending grow correctly and help more people afford their dream home, the Government and the construction industry must work together to alleviate the housing crisis by building at least 250,000 homes a year.’[1]

Gross mortgage lending hits biggest level for 9 years

Encouraging

‘Driven by the changes to Stamp Duty that kicked in from April, the mortgage market was firing on all cylinders in March as landlords, brokers and lenders shifted into top gear to complete on purchases,’ noted John Eastgate, Sales and Marketing Director of OneSavings Bank.

‘Whatever the cause, the effects of the Stamp Duty changes saw lenders, brokers and conveyancers burning the midnight oil to keep borrowers happy and this was reflected in mortgage activity,’ he continued.[1]

Henry Woodcock of IRESS, observed, ‘February’s gross mortgage lending figures were lower than January’s, so it’s very encouraging to see such a big pick-up in March. A month-on-month decline would have been concerning given the extremely favourable borrowing conditions.’[1]

‘We may we see a further uptick in April, however, looking to the next few months, there are a few factors I think will have a levelling-off effect on gross mortgage lending. The looming EU referendum may mean borrowers will wait and see the result before proceeding. The newly introduced stamp duty land tax surcharge, targeted at prospective private landlords and the Bank of England’s proposed new tighter lending rules to make it harder for landlords to get a mortgage, is bound to have a dampening effect on the buy-to-let market. Lastly, while remortgaging appears to be on the rise, I’d caution that increases may be limited for many interest only borrowers, as lenders now require credible repayment vehicles to be in place first,’ Woodcock concluded.[1]

[1] http://www.propertyreporter.co.uk/finance/market-booms-as-gross-mortgage-lending-hits-highest-levels-for-9-years.html