The mortgage market got off to a blistering start in 2016, with mortgage approvals and lending both up on their six monthly averages.
According to Bank of England statistics lending secured on houses increased by £3.7bn in January, compared with the average monthly increase of £3.4bn over the previous six months.
Meanwhile the number of loan approvals for house purchase was 74,581, compared with a six-monthly average of 70,221.
January 2016 saw the highest number of total monthly approvals since the same month in 2014.
Remortgaging did particularly well, with the number of loan approvals increasing by 33 per cent year-on-year and the value of remortgaging up by 45 per cent over the previous year.
Meanwhile approvals for house purchases grew by 22 per cent.
Peter Williams, executive director of Imla, said: “The threat of a rate rise is no longer driving the remortgaging uplift – instead it is being supported by homeowners looking to improve their financial situation through cheaper monthly repayments.
“In particular, landlords are preparing for fewer tax reliefs – like the loss of the wear and tear allowance and restriction of mortgage interest deductability.
“Accessing cheaper deals through remortgaging will help offset these when they come into place.”
The number of approvals for remortgaging was 42,228, compared to the average of 40,306 over the previous six months.
In his Summer Budget, chancellor George Osborne also said that from April 2017 the amount of tax relief on mortgage interest will be limited to the basic rate.
Meanwhile in his Autumn Statement he introduced a new level of stamp duty for buy-to-let investors and owners of second homes set at 3 per cent on top of current stamp duty rates, which will come into effect in April.
Richard Pike, sales and marketing director of Phoebus Software, said these changes could prompt an end to the market’s bouyancy in a few months’ time.
He said: “There are a few factors that could see a change to the buoyancy of the market in the coming months, changes to buy-to-let will no doubt be felt, but the uncertainty of a Brexit from the European Union is certainly a major factor.”
Adviser View
John Phillips, group operations director of Spicer Haart, said: “The recent hike in mortgage borrowing over the last six months has resulted in an increase in loan approvals for both house purchase and remortgaging.
“It is possible that this increase has been driven and boosted, in part, by the impending increase in stamp duty, and this has contributed to the current upward pressure on mortgage approvals.
“However, it is clear that lending increases as buyers’ confidence increases. This rise in mortgage borrowing could also be a result of market fundamentals including consumer confidence, strong real income gains and, with mortgage rates expected to fall again, it is likely to remain on an upward trend.”
