UK lending up as Stamp Duty boosts buying

Photo: Images_of_Money

UK lending continued to grow at the start of 2016, as the looming Stamp Duty hike for second home purchases boosted buying activity.

Gross mortgage borrowing totalled £13.6 billion in January 2016, 38 per cent higher than a year ago and the highest since mid-2008, according to new figures from the BBA. The number of mortgage approvals in January was 33 per cent higher than a year ago, with remortgaging up 42 per cent and house purchase up 27 per cent.

Borrowing by non-financial companies increased fairly strongly in January, after declining in December, particularly in the transport, storage and communication and construction sectors.

Richard Woolhouse, Chief Economist at the BBA, attributes the sharp jump to borrowers looking to get ahead of the increases in stamp duty for buy-to-let and second home buyers scheduled to come into effect in April.

Richard Sexton, director of chartered surveyor e.surv, comments: “Mortgage lending levels keep moving in the right direction – encouraging more people to take advantage of the house purchase funding options on offer and make the leap onto the property ladder. Delayed interest rate hikes, continually low inflation and higher employment have all brought an element of stability into the market, but it’s not all smooth sailing ahead – stamp duty changes are creating uncertainty, particularly for the buy-to-let sector. Speculation on the outlook for this sector is causing a knock-on in lending. Ahead of looming tax changes, buy-to-let lending is enjoying a boost. Post April, the sector will no doubt persist but there is a degree of thoughtfulness among prospective landlords. And it’s not all about buy-to-let. Homeowners seeking a second home will also be affected. These impacts appear to have created a short term uplift in related buying activities.”