Mortgage approvals rise before stamp duty increase

Mortgage approvals rise before stamp duty increase

Loan approvals for house purchases rose to nearly 74,000 in February, up from a six-monthly average of around 71,000, according to Bank of England figures, as buyers rushed to complete before new rules are introduced tomorrow (1 April).

From 1 April those wanting to buy a second home will have to pay an extra 3 per cent stamp duty, as the government tries to curb the but-to-let property market boom that has helped drive house prices to unseen levels and put homeownership out of the reach of increasing numbers of Britons.

Speaking about the Bank of England figures, Legal & General Mortgage Club’s director Jeremy Duncombe said the increase in demand is likely to be a knock-on effect of the buy-to-let stamp duty changes, as many second home owners and landlords have rushed to complete before the deadline.

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“Unfortunately, there are still not enough properties available to satisfy the needs of the market, too many buyers competing for fewer properties is a recipe for disaster, as it will leave many people priced out and disappointed,” he said.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said he expects the number of mortgage approvals for March to also be high, before they fall back in April as the market takes a breath.

The number of approvals for remortgaging was 40,749 - broadly in line with the average over the previous six months.

Mr Harris said: “Remortgaging numbers are steady and broadly in line with previous months. Borrowers are taking advantage of record low fixed rates, but there is no urgent motivation with interest rates unlikely to move for some months yet.”

“It is only when rates do start to rise that we expect to see a surge in the number of those remortgaging by which time, of course, mortgage rates will also be higher.”

Richard Sexton, director of chartered surveyor e.surv, said with an interest rate rise seemingly a long way off and even a further cut possible this year, low mortgage rates and a wide range of available mortgage products are bringing flexibility.

“Borrowers may be facing higher prices and higher deposit costs, but they are benefitting from low inflation and rising wages. Consumer competition remains high to grab the best property deals – but house purchase lenders are showing no signs of cold feet and remain bullish regarding the rest of 2016”