Borrowing soars as house prices jump 9% in a year

Borrowing soars as house prices jump 9% in a year

Borrowing to fund house purchases continues to soar by high double digits, as the price of an average UK property jumps 9 per cent in a single year.

Part of the increase was attributed to a rush among buyers to snap up buy-to-let properties before a 3 per cent stamp duty rise on second properties, introduced in April.

UK house prices increased by 9 per cent in the year to March, up from 7.6 per cent in the year to February, according to the latest and last Office for National Statistics house price index.

Article continues after advert

House price annual inflation was 10.1 per cent in England, 6.4 per cent in Northern Ireland, 2.1 per cent in Wales and minus 6.1 per cent in Scotland.

Annual house price increases in England were driven by a 13 per cent annual increase in London, along with 12.2 per cent in the south east and 12.1 per cent in the east of England.

Excluding London and the south east, UK house prices increased by 5.9 per cent in the 12 months to March.

On a seasonally adjusted basis, average house prices increased by 2.5 per cent between February and March.

The price of an average UK house, on a mix adjusted basis, was £292,000 in March.

This is the final house price index release from the ONS, as it will be replaced by the new UK House Price Index from June, using data from, among others, the Land Registry and Council of Mortgage Lenders.

Separately, the CML published its unadjusted lending figures for March, revealing huge jumps in the numbers of people taking out mortgages and in the amounts they are borrowing.

Home-owners borrowed £13.8bn for house purchase, up 59 per cent month-on-month and 60 per cent year-on-year.

They took out 69,800 loans, up 45 per cent on February and 38 per cent on March 2015.

First-time buyers borrowed £4.5bn, up by almost a third on February and 29 per cent on March last year. This totalled 28,100 loans, up 28 per cent month-on-month and 17 per cent year-on-year.

Home movers borrowed £9.3bn, up three quarters on February and 82 per cent compared to a year ago. This totalled 41,700 loans, up 60 per cent month-on-month and 58 per cent on last March.

Remortgage activity totalled £4.7bn, down 2 per cent on February, but up 7 per cent compared to a year ago. This came to 28,000 loans, again down 2 per cent month-on-month, but up 0.4 per cent year-on-year.

Paul Smee, director general of the CML, commented: “Activity was distorted in March due to a rush to beat the introduction of changes to stamp duty on second properties in April, alongside the seasonal uptick in activity before Easter.

“While the increases are substantial, these supercharged levels of activity are likely to be temporary and will fall back over the summer months.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, agreed, suggesting the market is now likely to pause for breath as investors consider their next move.

“That said, we don’t expect to see a significant slowdown in activity on the residential side. There are still excellent mortgage rates available, both fixed and variable. Interest rates are unlikely to rise anytime soon which will continue to attract first-time buyers and second steppers to the market.”