Govt schemes send February mortgage lending soaring

Govt schemes send February mortgage lending soaring

Gross mortgage lending reached £17.6bn in February, according to the Council of Mortgage Lenders, as government homebuying schemes competetive mortages drive the market.

This was the highest lending total for a February since 2008, when gross lending reached £24.1bn.

The total is also 5 per cent lower than January lending, which was £18.5bn, but 30 per cent higher than February last year, when it was £13.6bn.

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CML economist Mohammad Jamei said the growth rate was in line with that in 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 he did not expect any significant acceleration in lending ahead of new rules, due to be introduced in April, set to increase the amount of stamp duty buy-to-let landlords with multiple proporties have to pay.

“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,” Mr Jamei added.

Approvals for house purchase have been above 70,000 in the last four months and are likely to remain above that threshold in the near term, according to the CML figures. The pickup in remortgage activity has been the driving force behind lending over the last few months.

Henry Woodcock, principal mortgage consultant at Iress, said that with February marking the seventh year of record low interest rates, competition among mortgage lenders heated up with two-year fixed rates below 1.7 per cent.

“Remortgaging figures have strengthened as borrowers who are hedging their bets on continued low rates, take advantage of low mortgage deals.”

Mr Woodcock said his firm had seen more of a rush to borrow from buy-to-let landlords, and those buying a second home, as they seek to beat George Osborne’s increases in stamp duty.

He suggested there will be an upward lending trend in March, but it may dip in the second quarter, as effects of stamp duty changes and the introduction of the mortgage credit directive come into play. “Market jitters as the EU vote comes into view may also affect lending,” he said.