Mortgage loans plummet as tax break expires
MORTGAGE lending plunged in April after the stamp duty holiday expired, industry data showed yesterday, while economists warned the underlying state of the housing market is weakening.
Gross mortgage lending slumped from £12.6bn in March to £10.2bn in April – a 19 per cent fall to an 11-month low, according to data from the Council of Mortgage Lenders.
The particularly sharp drop hit the market because the stamp duty holiday for first time buyers came to an end in March, bringing forward some purchases.
Lending stood at £140.78bn for the whole of 2011 and £135.34bn in 2010, well down on the £362.76bn peak in 2008, illustrating the market’s sustained weakness.
“Housing market activity is very low compared to long-term norms, and the economic fundamentals currently look worrying for the market with unemployment high, earnings growth muted, and the outlook highly uncertain,” said Howard Archer from IHS Global Insight.
“In addition, relatively tight credit conditions may well make it hard for many people to get a mortgage. Furthermore, some mortgage rates have risen recently due to lenders’ higher borrowing costs in wholesale markets and this could well weigh down on housing market activity.”
Indeed increasing numbers of buy-to-let investors are turning to bridging loans to finance their debts, in part because they are struggling to access mortgages from banks – data from West One Loans shows gross lending in the sector hit £1.1bn in the 12 months to March.
“The mortgage market has gone into reverse,” added Richard Sexton of e.surv chartered surveyors. “Borrowers are already bearing the brunt of the political dithering in Europe, and are being hit hard by rate rises and tightening lending criteria”.