Mortgage lending recovery fades as stamp duty break ends

Wednesday, 02 May 2012 10:21

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The flurry of mortgage lending activity witnessed in the housing market at the start of the year could be on the decline again now that the stamp duty holiday has ended, latest figures suggest.

According to Bank of England data published today, the number of homebuyer mortgage approvals increased in March to 49,860 but was lower than the previous six-month average of 53,103.

The number of remortgage approvals also rose over the month to 29,511 but this was lower than the previous half-year average of 31,799.

Analysis by the Building Societies Association (BSA) also released today shows that gross mortgage lending by building societies and other mutuals rose by 40 per cent in the first three months of this year compared with the first quarter of 2011.

The stamp duty concession for first time buyers purchasing properties costing £125,000 to £250,000 ended after two years on March 24.

Adrian Coles, BSA director-general, said: “Some purchase decisions are likely to have been brought forward as a result of the deadline, so lending to first time buyers may dip slightly in coming months.”

David Marina, an independent mortgage broker at M&P Money Management, agreed that there has been a drop-off in activity since the stamp duty holiday ended.

“Demand from first time buyers hasn’t fallen off a cliff but it has slowed noticeably of late,” he said.

“The lack of activity at the foot of the property ladder will, of course, ripple up. That’s the worry for the broader market.”

He added that more homeowners are expected to remortgage in the months ahead as standard variable rates (SVR) creep upwards.

Meanwhile, the Bank’s figures revealed a rise in the amount of unsecured consumer lending, from £285 million in February to £419 million in March.

This includes increases in lending on credit cards, together with overdrafts and loans.

Dr Howard Archer, chief UK and European economist at IHS Global Insight, said that while this could be a sign that consumers have become modestly more prepared to borrow, unsecured consumer credit remains very low compared to long-term norms.

“It is apparent that consumer appetite for new taking on new borrowing is still limited while there is also an ongoing strong desire of many consumers to reduce their debt,” he said.

“Furthermore, the worry is that reports that the UK has fallen back into recession will hit consumer confidence and spending.”

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