Mortgage lending leapt by 30% in the 12 months to February to hit £17.6bn, according to the latest figures from banks and building societies.
Despite a 5% fall from January’s figure, the Council of Mortgage Lenders reported strong year-on-year growth, after low mortgage rates and demand for homes fuelled lending.
The £17.6bn total compared with £13.6bn in the same month of the previous year and was the highest lent in a February since 2008, when the downturn was starting to take hold.
The CML’s figures are for gross lending during the month and do not take into account repayments. Recent months have shown strong levels of remortgaging activity, as borrowers have taken advantage of fixed-rate mortgages at record lows.
The CML’s economist, Mohammad Jamei, said the annual rate of growth was in line with the figures for the closing months of 2015. “The recovery is being underpinned by market fundamentals in the UK, as wages grow and unemployment falls, helped by government schemes and competitive mortgage deals,” he said.
The change to stamp duty rates on second homes, which comes into effect on 1 April, led to a 40% rise in buy-to-let loans for house purchase in January, and it is likely that this boost continued into February.
However, Jamei said he did not think the figures pointed to a significant acceleration in lending. “While there may be a slight current boost to lending as some transactions seek to complete before the 1 April tax changes in the buy-to-let-sector, this is likely to be followed by a slight fall in activity,” he said.
“Affordability pressures continue to weigh on activity, as does the low number of properties coming on the market, though this has been improving very recently.”
Wednesday’s budget has confirmed that all property investors will face an extra stamp duty bill if they buy homes after 1 April. The rates on additional homes will be three percentage points above the standard stamp duty rates, which will add £6,000 to the upfront cost of investing in a £200,000 property.
Howard Archer, chief UK economist at IHS Global Insight, said lending was likely to have been boosted by both remortgaging and purchases. “Housing market activity is seemingly getting some boost at the moment from increased activity from buy-to-let and second home purchases ahead of April’s rise in stamp duty,” he said.
“This could exert limited upward pressure on house prices in the near term. Post April, a likely waning of buy-to-let interest may modestly dilute housing market activity and ease upward pressure on prices.”
The main house price indices show the cost of buying a home has risen more quickly than earnings over the past year, and Jeremy Duncombe, director of Legal and General Mortgage Club, which works with advisers and lenders, said buyers were being forced to take out larger loans to cope with increasing house prices.
“These high prices combined with a lack of affordable housing puts owning a property out of reach for many first time buyers. Initiatives that can aid the delivery of the 250,000 extra homes needed annually should be thoroughly explored by the government, with all options considered.” he said.
“As the chancellor himself conceded in his budget, more needs to be done to speed up the realisation of these new properties if the housing market and the wider economy is to return to full health.”