January sees the best yearly start to mortgage lending since 2008

By Isabelle Grange

March 16, 2016

mortgage rise

Residential mortgage lending sees a big rise in January as buyers race to complete buy-to-let purchases before new stamp duty surcharges come into effect…

It could be an excellent year for the UK mortgage industry with figures showing mortgage lending for the first month of 2016 was at its highest level since 2008.

The Council of Mortgage Lenders (CML) confirmed it was a busy first month of the year for the mortgage market. Mortgage lending was its highest level since the global financial crisis eight years ago.

Whilst some analysts suggest this busy period is mainly due to new buy-to-let rules coming into effect this spring, others think it could continue to be busy on into the year.

Home loans worth £17.9bn were advanced in the UK during January 2016 according to figures released by the Council of Mortgage Lenders. Not since £25.2bn was loaned in January 2008 has there been a busier first month of the year. The same figures show that in January this year £17.9bn of home loans were advanced to borrowers. This compares to £14.8bn that was loaned in January 2015. Although it’s 9% lower compared to December 2015, it’s more than 20% higher than last year’s January figure.

Another significant factor for the rise in lending, according to industry experts, is the choice of low-cost mortgage deals available. In addition, many people now believe it’s less likely interest rates will rise during 2016.

Speaking to the Daily Mail, mortgage expert Mark Harris said: “Schemes for first-time buyers, cheaper mortgage rates as well as challenger banks eager to lend all contributed to create a buoyant market that should last until the Spring. With the Bank of England suggesting interest rates will stay low for a number of months, borrowers confidence is high.”

High lending levels driven by buy-to-let changes

Howard Archer, who is a leading economist at IHS Global Insight, believes that January’s strong lending figures are partly because buy-to-let investors are rushing to complete purchases before stamp duty rates for landlords increase by three percent in April.

He added: “Expectations that interest rates will stay low are also a reason for increased activity in the housing market”. This reflects a report by Markit, the financial information services provider, that found less than half of households think interest rates will increase in the next 12 months.

Mohammad Jamei, an economist with CML, suggested the imminent rise in stamp duty for buy-to-let investors is contributing to an “element of uncertainty within the market”.

However, he added: “Fundamentals within the UK market are helping to underpin a recovery. An improved labour market, real wage growth, government schemes and competitive mortgage deals are all assisting demand from households.

He continued: “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.”

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