Market buoyant as mortgage lending hits highest level for 9 years

Latest figures from The Council of Mortgage Lenders (CML) show March saw gross mortgage lending hit £25.7bn and was more than likely driven by a push from borrowers trying to beat the additional 3% stamp duty surcharge in April.

The surge accounts for a 43% month-on-month increase in comparison to February. What’s even more astonishing is that mortgage lending was 59% higher than in March 2015 and is the highest figure seen in the month since 2007, where lending reached £30.9bn.

Gross mortgage lending in the first quarter of this year was therefore approximately £62.1bn. This is 39% higher than the first three months of 2015.

Economist at CML, Mohammad Jamei 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.

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

Jeremy Duncombe, Director, 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. 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.’

Duncombe then 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.’

John Eastgate, Sales and Marketing Director of OneSavings Bank, added: “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. It is important to note that whilst landlords will have been the driving force for growth, the new rules also captured many different types of purchaser.  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 further added, ‘Whether the spike is a one off or not, the fundamentals of the market remain strong. The benign outlook for interest rates is supporting the activity while buyer finances are being bolstered by a strong labour market.’

Responding to the figures, Henry Woodcock at IRESS, remarked, ‘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. The demand for mortgages has also been driven by continued low borrowing costs, with rates on two and three year fixed deals at all-time lows. Significant rate rises are unlikely to materialise any time soon, so we'll continue to see more low interest rate deals delivered to the market in the coming weeks and months, which is great news for mortgage customers.’

Henry also added. ‘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.’

At Orchard & Shipman we work with highly experienced financial services partners to offer our landlords the best value and quality financial products on the market including mortgages, buildings and personal insurance. If you want to find out how we could assist you with your financial needs, then visit http://www.orchard-shipman.com/services/financial-services/ or contact Orchard & Shipman today.