Stamp duty change prompts mortgage pick-up, say banks

David Dooks, of the British Bankers' Association, says "people don't want to take on extra debt"

The number of mortgage approvals for house purchases hit a two-year high in January ahead of the withdrawal of a stamp duty concession, banks have said.

There were 38,092 approvals during the month, reflecting a move by some first-time buyers to enter the market before the tax is levied again.

However, activity in the market remains low compared with the housing boom.

Meanwhile, borrowers remained cautious with loans and credit cards, the British Bankers' Association said.

"January saw the high street banks approve more mortgages for house purchase than of late, despite low household confidence, as some people try to complete transactions before the stamp duty holiday ends in March," said the association's statistics director David Dooks.

"Demand for unsecured personal borrowing remains low as consumers continue to repay debt."

Consensus

The pick-up in mortgage lending came from approvals for house purchases, rather than with remortgaging.

Start Quote

Beyond March the mortgage market is likely to click back into its default mode of flat”

End Quote William Hunter Hunter Wealth Management

The total number of approvals for house purchases in January was 34% higher than the same month a year earlier, when the figure was at a particularly low level.

The average mortgage approved amounted to £144,400.

The BBA said some of the extra activity was linked to the 1% stamp duty rate for first-time buyers, on properties worth between £125,000 and £250,000, being reintroduced on 24 March.

The Council of Mortgage Lenders and the Royal Institution of Chartered Surveyors have recorded a similar view, and home sales figures from HM Revenue and Customs also signalled a pick-up in January compared with the start of the previous three years.

Many first-time buyers are still finding it hard to get a mortgage, or are holding off making such a financial commitment given the uncertain state of the economy, so numbers remain relatively low compared with the boom.

Estate agent window Activity in the housing market remains at low levels despite the recent rise in mortgage approvals

"Beyond March, the mortgage market is likely to click back into its default mode of flat. Welcome though this boost is, by definition it is finite," said William Hunter of Hunter Wealth Management.

Debt

As in the past couple of years, consumers continued to take a safety-first approach to unsecured borrowing, the BBA figures show.

Repayments of £7.4bn outstripped new spending of £7.1bn on credit cards in January, while there was little demand for loans and overdrafts.

"The theme remains much the same. People are keen to manage [debt] down," Mr Hunter said.

"Debt, the deity of the nineties and much of the noughties, is now anathema to the man in the street."

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