Stamp duty break 'boosts mortgages'

 

The number of mortgage approvals for house purchase has reached a two-year high as borrowers rush to take advantage of a stamp duty holiday before it ends, a high street banking report has said.

Some 38,092 applications were approved in January, the highest figure seen for two years and a 34% rise on January 2011, despite the general mood of consumer caution around borrowing, the British Bankers' Association (BBA) said.

The body said the relatively strong figure reflected people looking to use the current two-year stamp duty exemption for first-time buyers before it ends next month, while remortgage approvals have remained broadly unchanged.

But analysts warned that the mortgage approval figures were only a "temporary boost", with activity having reached around two-thirds the level of the long-term average.

BBA statistics director David Dooks said: "January saw the high street banks approve more mortgages for house purchase than of late, despite low household confidence, as some people try to complete transactions before the stamp duty holiday ends in March.

"Demand for unsecured personal borrowing remains low as consumers continue to repay debt."

Gross mortgage lending of £8.3 billion in January was 2.2% higher than in January 2011, although cautious householders continued their determination to pay down their mortgage debts and improve their balance sheets.

High repayments by householders meant that net mortgage lending only increased by £700 million in January, the BBA said.

New spending on credit cards amounted to £7.1 billion, slightly lower than the £7.2 billion spent over the Christmas period in December but above the six month average.

But consumers continued to pay off more than they spent on credit cards, with £7.4 billion worth of repayments made in January, a figure unchanged from December.

The BBA said demand for personal loans and overdrafts remained "weak", with repayments continuing to outweigh new lending, resulting in a net repayment of £300 million.

Meanwhile, personal deposits and savings recorded a £3.6 billion increase in January as consumers tried to bolster their savings.

The BBA reported that the net lending to non-financial companies fell by £2.8 billion in January after a drop of £2.2 billion in December.

It said demand for borrowing from industry remained "subdued" as low confidence was impacting on lending to businesses.

The BBA's report comes after HM Revenue and Customs figures showed that home sales have had their strongest start to the year since January 2008.

Estate agents have also reported a recent surge in first-time buyer activity but fear the fragile housing market could be disrupted further when the exemption, which raises the threshold for first-time buyers from £125,000 to £250,000, ends on March 24.

HSBC recently examined first-time buyer loans taken out since the start of the holiday in March 2010 and found that around half were for a home which would normally have been liable for the duty.

Howard Archer, chief UK and European economist for IHS Global Insight, said of the latest mortgage figures: "This may well provide some support to house prices in the near term, but it will be a temporary boost."

He warned that job losses and muted earnings growth as well as the prospect of tougher borrowing conditions were countering the cheap deals being offered by lenders as the Bank of England maintains the base rate at a historic 0.5% low.

PA

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Retirement Coordinator - Financial Services

    Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

    Recruitment Genius: Annuities / Pensions Administrator

    Negotiable: Recruitment Genius: You will be the first point of contact for all...

    Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

    £18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

    Ashdown Group: Learning and Development Programme Manager

    £35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

    Day In a Page

    The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

    The saffron censorship that governs India

    Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
    Prince Charles' 'black spider' letters to be published 'within weeks'

    Prince Charles' 'black spider' letters to be published 'within weeks'

    Supreme Court rules Dominic Grieve's ministerial veto was invalid
    Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

    How did fandom get so dark?

    Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
    The galaxy collisions that shed light on unseen parallel Universe

    The cosmic collisions that have shed light on unseen parallel Universe

    Dark matter study gives scientists insight into mystery of space
    The Swedes are adding a gender-neutral pronoun to their dictionary

    Swedes introduce gender-neutral pronoun

    Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
    Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

    Disney's mega money-making formula

    'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
    Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

    Lobster has gone mainstream

    Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
    Easter 2015: 14 best decorations

    14 best Easter decorations

    Get into the Easter spirit with our pick of accessories, ornaments and tableware
    Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

    Paul Scholes column

    Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
    Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

    The future of GM

    The greenhouses where Monsanto 'plays God' with the future of the planet
    Britain's mild winters could be numbered: why global warming is leaving UK chillier

    Britain's mild winters could be numbered

    Gulf Stream is slowing down faster than ever, scientists say
    Government gives £250,000 to Independent appeal

    Government gives £250,000 to Independent appeal

    Donation brings total raised by Homeless Veterans campaign to at least £1.25m
    Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

    The most borrowed book at Bank of England library? Oh dear

    The book's fifth edition is used for Edexcel exams
    Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

    Cowslips vs honeysuckle

    It's the hunt for UK’s favourite wildflower
    Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

    Did a botched blackmail attempt help Cyril Smith escape justice?

    A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss