January mortgage lending strongest since 2008

Mortgage lenders have reported their strongest January since 2008, in further signs that the housing market is set for an active year.

The Council of Mortgage Lenders (CML) said £17.9 billion-worth of home loans were handed out across the UK in January.

Cheap mortgage deals, reduced expectations that interest rates will soon start to rise and schemes like Help to Buy are boosting the market, with buy-to-let investors also pushing house sales through to beat a looming stamp duty hike, experts said.

The January total is more than a fifth (21%) higher than the £14.8 billion lent in the same month in 2015 and marks the highest lending total for the month of January since £25.2 billion-worth of mortgages were handed out in January 2008.

The January 2016 total is still 9% lower than December's total of £19.8 billion.

Property website Rightmove recently reported that house-sellers' asking prices across England and Wales jumped to a record high of nearly £300,000 on average in February. The typical price tag on a property coming to market is now £299,287.

The property listings website has also seen evidence that the supply of properties coming on the market is edging up in some areas. A lack of supply has been blamed for holding back sales.

Howard Archer, chief UK and European economist at IHS Global Insight, suggested the strong lending month in January is likely to have been partly due to buy-to-let investors rushing to complete purchases before a three percentage point stamp duty hike above current rates comes into force for this sector in April.

He continued: "Reduced expectations of an interest rate hike may well also be boosting housing market activity."

A report from financial information services provider Markit this week found that less than half of households now expect interest rates to start increasing in the next 12 months.

CML economist Mohammad Jamei said the looming stamp duty hike for buy-to-let investors is adding an "element of uncertainty to the market".

He continued: "UK market fundamentals are helping to underpin this recovery, with real wage growth, an improving labour market, competitive mortgage deals, and government schemes all supporting household demand."

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: "Cheap mortgage rates, challenger banks keen to lend and schemes aimed at helping first-time buyers on to the ladder, are all helping create a buoyant market, which we expect to continue well into the spring.

"With the Bank of England suggesting that interest rates won't rise for many months to come, confidence among borrowers is high."