Lending 59% higher in March

Mortgage lending was 59% higher in March 2016 year-on-year as landlords clamoured to beat the stamp duty surcharge deadline, today’s Council of Mortgage Lenders figures show.

A total of £25.7bn was lent, which was 43% higher than February’s total of £18bn.

Mortgage lending for the first quarter of the year reached an estimated £62.1bn, the same level as in the previous quarter but 39% higher than the first quarter last year.

Mohammad Jamei, CML economist, 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.

“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.”

Lucy Hodge, director of Vantage Finance,said:“The CML’s estimate for gross mortgage lending in March comes as no surprise – at Vantage Finance we saw a considerable increase in activity throughout the month, as investors made a final push to get transactions over the line before the tax changes at the beginning of April.

“I expect this surge in activity represents a logical move from professionals with investments already in the pipeline, rather than a case of panic buying.

“Although we can anticipate a slight dip in activity following this milestone, I envisage the impact to be short-lived. Landlords have had plenty notice of these changes and I have no doubt the majority have already adapted and readjusted to what is effectively a new cost of entry to the market.”

And Mark Harris, chief executive ofmortgage broker SPF Private Clients, added: "Entirely predictably, March was a stonking month for the mortgage market as investors rushed to complete before the stamp duty hike was introduced in April.

"However, this state of affairs is not expected to carry on at the same level into the second quarter of the year with many landlords bringing forward decisions to buy.

"The market is now likely to pause for breath as investors consider their next move, possibly later in the year."

Ian Thomas, co-founder and director of LendInvest, said:“Buy-to-let was a key driver behind the sharp year-on-year increase in gross mortgage lending. Landlords across the country fought tooth and nail to get deals completed by 31 March so that they could avoid the higher stamp duty charge for second and additional homes.

“However, it’s now a case of ‘the morning after the night before’. The stamp duty change means building a property portfolio is simply a much tougher financial task for would-be amateur landlords.

“Buying five properties at £150,000 each would previously have cost a landlord a total of £2,500 in stamp duty. Today those same five properties would cost a landlord £25,000, ten times more.

“Things will get even tougher next year, when the changes to the tax relief available on buy-to-let mortgage interest begin to be phased in.

“That said, we believe that professional landlords that are able to buy well in strong locations will continue to thrive, through careful financial planning.”

Adrian Whittaker, sales director, New Street Mortgages, said:“It is no surprise that lending has risen significantly this month, as buyers who were planning a buy-to-let purchase rushed to complete their mortgage applications ahead of the changes to stamp duty.

"Whilst we may see this demand tail off now that these measures are in effect, competition in the market will remain strong as people continue to look to buy-to-let as an investment vehicle.

“The smart lenders are actively helping buyers to get ahead in this race to buy property, using financial technology to empower brokers with transparency and to speed up mortgage applications. Providers that embrace this technology to streamline the lending process and get an offer out before the competition will find themselves the first choice in this fast-paced, competitive housing market.”

Henry Woodcock at IRESS, added:“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.

“The buy-to-let charge to beat George Osborne’s increases in stamp duty has certainly boosted figures in March which are up 43% from February and 59% from March last year. These are the highest March figures in the last nine years. 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.

“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.”

John Eastgate, sales and marketing director of OneSavings Bank,said:“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.

“Whether the spike is a one off phenomenon or not, the fundamentals of the market remain strong. The benign outlook for interest rates is supporting activity, while buyer finances are being bolstered by a strong labour market.”