Mortgage lending at its highest level since 2008
Gross mortgage lending rose by 8% in 2015, with an estimated total for the year of £220.3 billion. This is the highest annual gross lending figure since 2008, according to the latest figures from the Council for Mortgage Lenders (CML).
In December 2015 alone, the CML estimates that gross mortgage lending reached £19.9 billion in December 2015. While this is 3% lower than November at £20.5 billion, it is 23% higher than December 2014 at £16.2 billion.
Gross mortgage lending for the fourth quarter of 2015 was an estimated £62.3 billion – a 1% increase on the third quarter and a 23% increase on the fourth quarter of 2014.
CML economist Mohammad Jamei says: “The low inflation environment, along with real wage growth, an improving labour market and competitive mortgage deals have all helped to underpin demand.
However, Mr Jamei believes there will be limited opportunities for growth in the housing market over the short term.
He says: “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.”
‘We expect the market to settle down from mid-March’
Commenting on the CML figures, Jeremy Leaf, a former RICS chairman and north London estate agent, says: “The housing market was busy towards the end of last year, a trend which has continued into this one. However, as the CML suggests, this is not likely to be a market that is going to run away with itself. We expect things to settle down from mid-March when the market will find a new level, as it will be too late for investors and second-home buyers to complete before 1 April to avoid higher stamp duty.
“Surprisingly, what we have found is demand split roughly equally between investors keen to beat the 3% stamp duty surcharge from April and first-time buyers wanting to take advantage of additional property choice and competitively priced mortgages before interest rates start to rise.”
Richard Sexton,director of e.surv chartered surveyors, adds: “House purchase lending has been rejuvenated over the past year and, with the second half of 2015 looking stronger than the first in lending terms, the trend looks positive. Small-deposit lending has been transformed by a renewed enthusiasm to help first-time buyers cross the threshold of home ownership, as evidenced by the number of higher loan-to-value products available.
“Supply issues have become more of a factor in some areas as we head towards the turn of the year, as both growing demand and house prices finally get the attention they deserve from the government, but limited choice of affordable homes is certainly proving a challenge to some buyers. Alongside this obstacle, higher stamp duty changes are finally making their mark upon the top end of the market,” he adds.
A hugely unpopular tax paid on property and share purchases. Stamp duty on property is levied at 1% for purchases over £125,000 (£250,000 for first-time buyers) which then moves up at a tiered rate. For property between £125k and £250k you pay 1%, then 3% from £250k up to £500k and then 4% from £500k to £1m and then 5% for properties over £1m. But unlike income tax, which is “tiered” and different rates kick in at different levels, stamp duty is a “slab” tax where you pay the rate on the whole purchase price of the property. On shares, stamp duty is charged at a flat rate of 0.5% on all share purchases. Figures correct as of May 2011.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
Everything you own: all your assets (property, cars, investments, savings, insurance payouts, artwork, furniture etc) minus any liabilities (debts, current bills, payments still owed on assets like cars and houses, credit card balances and other outstanding loans). When you’re alive this is called your wealth; when you’re dead, it becomes your estate.
The catch-all term applied to investors who buy properties with the sole intention of letting them to tenants rather than living in them themselves, with the proceeds from the let usually used for the repayment of the mortgage. Buy-to-let investors have to take out specialised mortgages that carry higher interest rates and require a much bigger deposit than a standard mortgage. Other expenditure can include legal fees, income tax (on the rental profits you make), capital gains tax (if you sell the property) and “void” periods when the property is unlet.