World Economy

Sharp Increase in UK Mortgage Lending

Sharp Increase in UK Mortgage Lending  Sharp Increase in UK Mortgage Lending

Gross mortgage lending by the high street banks reached an eight-year high in March, and at £17.1 billion ($25 billion) was 64% higher than a year ago.

Figures from the British Bankers Association show a sharp increase in borrowing for buy-to-let and second homes, ahead of the increase in stamp duty on 1 April 2016, Mortgage Finance Gazette reported.

The number of mortgage approvals in March was 20% higher than a year ago, with remortgaging up 25% and house purchase up 14%.

Dr. Rebecca Harding, chief economic advisor at the BBA, commented: “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.

Jeremy Leaf, a former Royal Institution of Chartered Surveyors chairman and north London estate agent, commented: “The year-on-year spike in lending is as expected but it seems approvals are already slowing which shows the market is likely to find a new level now that the deadline for avoiding the higher stamp duty rate has passed.

“This month we have still seen plenty of first-time buyers as the withdrawal from the market of investors has presented them with an opportunity. First-time buyers are still taking advantage of low mortgage rates and these don’t look set to rise anytime soon. However, demand overall will be down until investors seek to dip a toe in the water again.

  Lower Confidence

“Prices are softening generally but not by a huge amount yet. The market has been a little bit distorted with the Easter break and the school holidays. It is not unreasonable to suggest that prices will soften further with the Mayoral election and Brexit having an impact on confidence.”

Unsecured borrowing by households is growing at around 6% per annum reflecting low interest rates and relatively strong household finances, said the banking trade body.

Harding added: “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.

“Business borrowing is moderating within distribution, manufacturing, food and accommodation sectors, as large corporates use capital markets for their funding and both large and small businesses continue to build up deposits.”