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Mortgage lending at seven year high

Christina Hoghton
Written By:
Christina Hoghton
Posted:
Updated:
21/01/2016

Mortgage lending reached an enormous £220.3bn last year, up 8% compared to 2014 and higher than trade body the Council of Mortgage Lenders had estimated

Lending boomed beyond expectations last year, hitting its highest level for the last seven years, according to data from the Council of Mortgage Lenders.

It reported that annual mortgage lending reached an estimated £220.3bn in 2015, an 8% increase on 2014 and the highest figure since 2008.

Lending totalled £19.9bn in December, decreasing 3% from November’s figure of £20.5bn, but rising 23% compared to December 2014, which saw £16.2bn.

Mohammad Jamei, economist at the CML, said the annual figure was slightly higher than expected, boosted by low inflation wage growth, an improving labour market and competitive mortgage deals.

But he warned: “The upside potential looks limited over the near-term, as the supply of existing and new properties on the market remains weak, and affordability pressures weigh on activity. There is an added element of uncertainty as we wait to see the impact of tax changes on the buy-to-let sector.”

The tax changes, announced as part of the Summer Budget, mean the tax relief landlords can claim on their monthly mortgage interest repayments will in future be reduced to 20%, regardless of their personal top rate of tax. At present they can claim up to 45%. The changes will be phased in from April 2017.

A 3% Stamp Duty premium will also come into effect on second homes and buy-to-let properties from April, announced by George Osborne in the Autumn Statement.

Mark Harris, chief executive of SPF Private Clients, said he expects to see a flurry of activity in the coming weeks from investors keen to take advantage of low buy-to-let rates.

“However, lenders are imposing tighter criteria on buy-to-let mortgages when it comes to stress testing, and others are expected to follow, making it harder to qualify for higher loan-to-value mortgages, particularly in the south where yields are low,” he added.