Stamp duty effect boosts mortgage lending
Wednesday, 16 May 2012 10:46 AM
Lending across the whole mortgage market surged in March ahead of the end of the stamp duty holiday, according to new figures.
The Council of Mortgage Lenders (CML) said much of the increase was in loans to first-time buyers taking advantage of the concession but that loans to home movers also rose.
The big question now is whether lending will fall again, as it has after previous stamp duty holidays, or hold up as schemes like NewBuy come into effect.
Paul Hunt, managing director of Phoebus Software said: "The colossal but temporary impact of stamp duty is behind March’s skyrocketing lending figures.
"While bunting and party hats would normally be in order following a 76 per cent monthly rise in lending value to first-timers, March's figures are the crest of a wave."
Banks and building societies made 24,000 loans to first-time buyers, an increase of 74 per cent on February and 57 per cent on March 2011. The loans were worth £3bn, an increase of 76 per cent on last month and 67 per cent on a year ago.
Of the first-time buyers taking out a mortgage in March, 63 per cent bought a property worth between £125,000 and £250,000 and so benefitted from the concession. The normal proportion buying in that price band is 50 per cent.
The CML said that first-time buyer purchases also triggered an increase in lending to home movers. There were 27,200 loans in March, an increase of 25 per cent on February and 15 per cent on a March 2011.
Taken together, the total number of house purchase loans was up 44 per cent on February and 31 per cent on a year ago.
CML director general Paul Smee said: "We expected this significant increase in borrowing for March because of the stamp duty holiday.
"However, if lending follows the same pattern as after previous stamp duty concessions, we will likely see a drop in activity in the next few months. It will take some time before we can judge whether other initiatives such as the NewBuy scheme and the reinvigorated right to buy will compensate for this effect."
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