Stamp duty hike 'led to big rise in mortgage lending'

Up to £5 billion-worth of extra mortgage lending took place as buy-to-let investors rushed to beat a deadline for a stamp duty increase, analysis by the Council of Mortgage Lenders (CML) has found.

In total, an estimated £25.7 billion-worth of mortgages were handed out in March across all types of borrowers - marking a leap of nearly 60% compared with March 2015, the CML said.

It said the distortion caused by the April 1 stamp duty change appears to be larger than any previous change it has seen to the tax - and the impact will continue to ripple through the housing market for the next few months.

In its "market commentary" on its website, the CML said: "Our analysis suggests there was £4-£5 billion extra lending than would otherwise have been the case, which translates to about 30-35,000 more transactions as a result.

"We will have no detailed split of transactions for some time yet, but preliminary analysis points to the bulk of these transactions as buy-to-let house purchases.

"A portion will also be owner-occupier house purchases which were sped up to complete, for example a chain involving a buy-to-let landlord.

"The early timing of Easter will have played its part too, as movers generally prefer to complete transactions before the Easter break."

The latest lending total is the highest for the month of March since 2007, as well as being a sharp 43% increase compared with the £18 billion-worth of mortgages handed out in February.

Estate agents previously reported dealing with a bottleneck of investors snapping up homes as the April 1 deadline for the stamp duty hike loomed. The increase means people buying a second home, including buy-to-let investors, now have to pay an extra three percentage points on previous rates.

But as a result of the bunched up activity in March, the CML now expects to see 10,000 fewer property sales taking place per month with a mortgage in April, May and June, than would have happened without the stamp duty hike.

The bottleneck in March means that many house sales will have been brought forward which might otherwise have taken place later in the year.

The CML said: "We expect to see about 10,000 fewer mortgaged transactions each month in April, May and June, than would otherwise have been the case, offsetting the increase in activity seen in March."

CML economist Mohammad Jamei said: "Against a backdrop of a recovering market, the substantial jump in lending in March was significantly influenced by a late surge of activity to beat the Government's stamp duty change on second properties, which came into effect at the start of April.

"The distortion caused by this stamp duty change appears to be larger than any previous stamp duty change we've seen."