January mortgage lending is the best start to a year since 2008

Posted 24 February 2016 by Keith Osborne

The race to complete buy-to-let purchases before the new stamp duty surcharge applies has helped residential mortgage lending surge in early 2016...

2016 could be a bumper year for the mortgage industry in the UK after new figures show that lending in January was at its highest level for the month since 2008.

The data from the Council of Mortgage Lenders (CML) shows that the mortgage market in the UK enjoyed a busy January, with lending at its highest level for this time of year since the global financial crisis. Some experts believe that the country is set for a bumper year while others believe the uplift in lending is due to changes in buy-to-let rules set to come into force this spring.

CML reports highest January mortgage lending figure for eight years

The new figures from the Council of Mortgage Lenders reveal that £17.9bn of home loans were advanced in the UK in January - the highest lending total for the month since £25.2bn of mortgages were handed out in January 2008. The figure is more than a fifth higher than the £14.8bn lent in January 2015 although is still 9% lower than the £19.8bn lent in December.

Experts have attributed the rise in lending to the range of low-cost mortgage deals that are available, particularly in light of reduced expectations that interest rates will rise in 2016.

Mortgage expert Mark Harris told the Daily Mail: "Cheap mortgage rates, challenger banks keen to lend and schemes aimed at helping first-time buyers on to the ladder, are all helping create a buoyant market, which we expect to continue well into the spring. With the Bank of England suggesting that interest rates won't rise for many months to come, confidence among borrowers is high."

Buy-to-let changes helping to drive lending

Howard Archer, chief UK and European economist at IHS Global Insight, suggests the strong lending in January is likely to have been partly due to buy-to-let investors rushing to complete their purchases before a three percentage point stamp duty increase above current rates comes into force for landlords in April.

He adds: "Reduced expectations of an interest rate hike may well also be boosting housing market activity", reflecting a report from financial information services provider Markit that has found that less than half of households now expect interest rates to start increasing in the next 12 months.

CML economist Mohammad Jamei says the forthcoming stamp duty hike for buy-to-let investors is adding an "element of uncertainty to the market".

He continues: "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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