Stamp duty effect sees 74% increase in FTBs

As expected, the end of the stamp duty concession led to a surge in activity in the mortgage market in March, a 74% increase on Februrary, according to new data released today by t

Related topics:  Mortgages
Millie Dyson
16th May 2012
Mortgages
The largest increase was in lending to first-time buyers, who took out 24,000 loans in March.

This was an increase of 74% compared to February and 57% higher than March 2011. By value, first time buyers took out loans worth £3 billion, up 76% from the previous month and 67% from March last year. First-time buyers accounted for 42% of total house purchase loans, the highest proportion since 2001.

Of those first-time buyers taking out a mortgage in March, 63% bought a property valued between £125,000 and £250,000 so were exempt from stamp duty. This compares to an average of around 50% since 2006.

98% of first-time buyers in March took out a repayment loan, the highest since CML records began. Although the stamp duty holiday only related to first-time buyers, the tendency for property transactions to involve ‘chains’ resulted in knock on effects to other house purchasers also.

27,200 loans, worth £4.3 billion, were taken out by home movers in March, up by 25%, 19% by value, compared to February and 15%, 10% by value, compared to March 2011.

Combined, the total increase in the number of house purchase loans in March was 44% from February and 31% compared to last March.  Remortgage activity, on the other hand, was essentially flat. £3.6 billion was advanced in the month, unchanged from February, and 14% lower than March last year.

On a quarterly basis, the lending picture was different, showing a less marked annual improvement than the monthly data. There were 5% fewer first-time buyers in the first quarter compared to the final quarter of last year, but 33% more than the first quarter of 2011.

Home movers took out 18% fewer loans in the three months to March than in the previous three months, but 14% more than the first three months of 2011. The total value of loans for remortgage also fell in the first quarter of the year.  £11 billion was advanced in the first quarter, 7% lower than the previous quarter and a 4% fall compared to the first quarter of 2011. 

CML director general Paul Smee said:

"We expected this significant increase in borrowing for March because of the stamp duty holiday.

"However, if lending follows the same pattern as after previous stamp duty concessions, we will likely see a drop in activity in the next few months.

"It will take some time before we can judge whether other initiatives such as the NewBuy scheme and the reinvigorated right to buy will compensate for this effect."

Paul Hunt, managing director of Phoebus Software said:

“The colossal but temporary impact of stamp duty is behind March’s skyrocketing lending figures. While bunting and party hats would normally be in order following a 76% monthly rise in lending value to first-timers, March’s figures are the crest of a wave.

"April undoubtedly will show falls on a similar scale. But that’s not to say mortgage lending is excessively conservative at the moment. That such a large rise was possible is down to lenders’ confidence in the ability of first-time buyers rushing through the closing fiscal window to service debt in the long-term.

"We will see an apparently violent fall in lending next month, but these big fluctuations mask the true picture of ongoing steady progress in the lending market”.
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