Stamp duty holiday boosts lending
MORTGAGE approvals rose to the highest level in more than two years in January as first-time buyers rushed to beat the cut-off date for a stamp duty exemption.
Bank of England figures showed the number of home loans for house purchase rose to 58,728 – the highest total since December 2009.
First-time buyers are currently exempt from stamp duty on homes worth up to £250,000. The exemption, introduced in the 2010 Budget, is due to end on March 24. After that date first-time buyers purchasing homes valued between £125,000 and £250,000 will be taxed at one per cent.
Martyn Dyson, of Nationwide Building Society, said: “On the average first-time buyer property valued at about £140,000, that would cost an additional £1,400.”
The Bank of England said net mortgage lending rose to a 17-month high of £1.6billion in January, from an upwardly revised £1billion in December. The Building Societies Association also reported £1.7billion of mortgage approvals in January, a 54 per cent increase on a year ago.
There is a very real risk that banks’ willingness to lend to prospective home buyers will diminish due to the weak economic environment.
Economists warned that when the stamp duty holiday ends the housing market will be more vulnerable, as low wage growth and unemployment will stop many people moving. They also warned of a risk banks would tighten lending conditions.
Howard Archer, chief UK economist at IHS Global Insight, said: “There is a very real risk that banks’ willingness to lend to prospective home buyers will diminish due to the weak economic environment.”
However Mr Archer, who had previously predicted house prices would fall five per cent by the end of 2012, has revised this figure to three per cent.
Mortgage approvals are still well below the average monthly level since 1993 of about 88,000.