Mortgage lending surged dramatically in March, returning to the peak levels last seen before the financial crash, as buy-to-let speculators and second home buyers rushed to beat the stamp duty tax deadline.
Total lending rose to £17.1bn, 64% higher than the same month a year ago, and the highest figure since April 2008, according to the British Bankers Association.
Buyers frantically closed property deals ahead of the introduction of a 3% hike in stamp duty for buy-to-let and second homes that began in April.
Remortgaging by existing home owners also leapt, with households taking advantage of cheap mortgage deal amid the widespread belief that interest rates will stay low for an extended period of time.
The average mortgage loan taken out reached a record high, hitting £184,200, compared to £158,000 at the peak of the previous lending cycle in April 2008.
But the bank lending figures reveal an increasingly lop-sided financial picture, with borrowing by manufacturers for investment falling sharply while borrowing for buy-to-let speculation has boomed.
Lending to manufacturing companies, which had been growing at an annual rate of 12% in 2014, has fallen back to zero, while in construction it is falling.
Meanwhile, personal borrowing on credit cards continues to rise. British households made 223m purchases on their credit cards in March, with a total value of £12.6bn. But while the volume of purchases increased by 2%, the value fell by 1% compared to the same month last year.
Mortgage brokers said they are preparing for a steep decline in lending during April. Adrian Anderson of Anderson Harris, said: “As expected, March was a bumper month for mortgages. Investors and second homeowners alike rushed to beat the hike in stamp duty at the start of April but expect April and May’s lending figures to be more subdued as transactions that would normally have happened then were brought forward.”
“The mortgage market is far from racing away with itself. The flood of buyers we saw in March will not necessarily be replaced in the short term while for many borrowers, tougher affordability criteria is still a barrier to getting a mortgage or remortgaging.”
Others reckon that the EU referendum may help first-time buyers, with many predicting a softening in the market.
Jeremy Leaf, a former RICS chairman and north London estate agent, said: “This month we have still seen plenty of first-time buyers as the withdrawal from the market of investors has presented them with an opportunity.
“Prices are softening generally but not by a huge amount yet. It is not unreasonable to suggest that prices will soften further with the Mayoral election and Brexit having an impact on confidence.”
First-time buyers can take advantage of loans at historically low levels, said data provider Moneyfacts. “The average two-year fixed mortgage rate has decreased from 2.97% to 2.55% in just 12 months, while the average five-year fixed rate has dropped from 3.53% to 3.19% over the same period.”
