Mortgage borrowing surges as investors look to beat stamp duty hike

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Mortgage borrowing leapt to its highest levels in around eight years in March as buy-to-let investors rushed to beat a stamp duty hike, banks have reported.

Gross mortgage borrowing of £17.1 billion was recorded in March, marking a 64% increase compared with a year earlier as well as being the highest figure since April 2008, according to figures from the British Bankers' Association (BBA).

The number of mortgage approvals in March was 20% higher than a year earlier, with 78,448 mortgages worth £13.4 billion collectively given the go-ahead. Re-mortgaging approvals were up by 25% and approvals for house purchase were up by 14%, the BBA said.

Estate agents reported dealing with a bottleneck of buy-to-let investors rushing to beat a stamp duty deadline of April 1, when the tax was hiked by three percentage points for second home buyers.

There have also been reports suggesting that the flood of investors into the housing market enabled house sellers to trade up into bigger properties, pushing up house prices higher up the property chain.

The BBA's figures also showed that the amount of cash flowing into Isas from savers has fallen back sharply compared with a year earlier.

Isa deposits saw a net inflow of £866 million in March, compared with a figure of £1.8 billion in March 2015. Isas have traditionally had tax advantages over other savings accounts, but the new personal savings allowance, which was introduced on April 6, has taken the vast majority of savers out of paying any tax on their savings interest at all.

The BBA said that over the past year, net borrowing using personal loans has been rising at an annual rate of more than 5%. It said increased demand for loans reflects better credit availability, low interest rates and stronger household finances.

Meanwhile, non-financial businesses' net borrowing increased by £303 million in March. The BBA said the real estate sector increased its borrowing by £1.5 billion, a figure possibly inflated by the stamp duty change. The transport, storage and communication sector decreased its borrowing by £1.3 billion, while the construction sector also reduced its borrowing.

Dr Rebecca Harding, chief economic advisor at the BBA, said: "A surge in buy-to-let and second home buying ahead of the new stamp duty surcharge in April led to a sharp rise in March's gross mortgage borrowing as people brought transactions forward.

"For households more widely, consumer credit continues to grow above real earnings growth, as improving consumer confidence and low interest rates combine to stimulate borrowing demand for personal loans, cards and overdrafts."