Mortgage lending dives as stamp duty holiday ends

Mortgage lending dived to a 10-year low during January as the housing market suffered a lull following the end of the Government's stamp duty holiday, figures showed today.

Total mortgage advances dived by 32 per cent to £9.1 billion during the month, the lowest level since February 2000, according to the Council of Mortgage Lenders (CML).

The group said there was typically a fall-off in lending during January, as househunters put moving plans on hold over Christmas.

But it said this year's drop was larger than usual, and had been caused by people buying lower-value properties rushing to push through their purchase before the stamp duty holiday ended at the beginning of this year.

The drop in lending comes after the group reported a "surprisingly strong" figure for December, with mortgage advances jumping by 14 per cent during the month, bucking the usual seasonal trend.

It attributed the rise to increased demand as people buying properties costing up to £175,000 tried to complete their purchases before the threshold at which stamp duty kicks in returned to £125,000 at the beginning of this year.

It said 55 per cent of homes purchased during the month cost less than £175,000, with 10,300 first-time buyers purchasing a property for between £125,000 and £175,000 - 63 per cent more than in November.

But the CML warned that the rush by buyers to cash in on the stamp duty holiday in the final months of last year was likely to lead to a drop in activity during the early months of 2010.

CML economist Paul Samter said: "We remain in a period of uncertainty for the housing market and economy at large.

"The market certainly improved over the second half of last year and started 2010 in better shape than most would have predicted 12 months ago.

"More recent developments have been influenced by the end of the stamp duty holiday and are likely to foreshadow a larger than usual seasonal drop-off in activity in the early part of this year."

Brian Murphy, head of lending at Mortgage Advice Bureau, said: "We shouldn't read too much into the January data, which is a result of both seasonal factors and December's stamp duty holiday rush.

"Overall, the market is in a far better state, with mortgage availability at a 12-month high.

"This time last year the mortgage market was in a coma, but in the past three to four months a lot more products have become available, as lenders once again start fighting for market share."

Figures released by the Bank of England today also showed a fall in both mortgage lending and the number of loans approved for house purchase during January.

Lenders attributed the drop to a combination of the end of the Government's stamp duty holiday and the severe winter weather, which put people off househunting.

But the Trends in Lending report showed that mortgage availability for borrowers with only small deposits had continued to increase.

Financial information group Moneyfacts said the number of products available for people borrowing 75% or more of the value of their home had reached its highest level in January since September 2008.

Mortgage rates also fell during the month as competition returned to the market.