Stamp duty ‘hangover’ limits New Year lending
Thursday, 18th February 2010
Mortgage lending across the UK plummeted at the turn of the year as first-time buyers could no longer lessen the costs of housing with stamp duty exemptions, lenders have claimed.
Statistics from the Council of Mortgage Lenders (CML) show there were 24,900 mortgages agreed with consumers purchasing their first property in the last month of 2009 - the highest figure since November 2007.
More than half (55%) of the loans were for houses valued at less than £175,000, making them eligible for exemption from stamp duty.
But gross lending for home loans fell by 32% in January and, despite common seasonal decline, the figure was 21% lower than the first month of 2009.
"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,” said CML Economist, Paul Samter.
During December, some 10,300 first-time buyers and 11,200 movers bought a property worth between £125,000 and £175,000 - up 63% and 49% respectively compared with November.
"This clearly indicates a rush to complete purchases before January, when stamp duty would have added an additional one per cent of the purchase price onto the transaction costs," the CML said.
The stamp duty threshold was reduced to £125,000 at the start of the year as the government’s temporary concession was terminated. But the CML is still optimistic despite the decline in lending.
"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," said Brian Murphy, Head of Lending at the Mortgage Advice Bureau.
"But while more competitive rates are starting to emerge at higher loan-to-value levels, you still need a faultless credit history if you are to secure a loan."
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