Council of Mortgage Lenders reports post-stamp duty slump and warns of potential for ‘a sharper downwards correction’ if the eurozone crisis deteriorates
Mortgage lending slumped 19% to its lowest level for a year in April as many buyers brought forward their property purchases in order to benefit from the stamp duty holiday that ended in March, according to industry data.
The Council of Mortgage Lenders, which issued the figures, said the underlying picture appeared to be one of “easing momentum” in the housing market, but warned of the potential for “a sharper downwards correction” if the eurozone crisis were to worsen.
After a relatively buoyant few months, gross mortgage lending fell to an estimated £10.2bn in April 2012 compared with £12.6bn in March, the CML said. This is the lowest figure since April 2011 when lending came in at £10bn.
The CML’s chief economist, Bob Pannell, said its recent data provided clear evidence of a spike in first-time buyer activity in March, immediately ahead of the end of the stamp duty holiday on homes costing between £125,000 and £250,000 on 24 March. Its figures for March showed a 74% increase in first-time buyer numbers.
“To the extent that first-time buyers brought forward transactions into March, we would expect to see a mirror effect in April,” Pannell said. But given the unfavourable economic and financial backdrop, he said he found it hard to believe the stronger levels of house buying activity seen in recent months would be maintained.
Howard Archer, chief UK and European economist at IHS Global Insight, said the CML figures followed several recent surveys pointing to slower housing market activity. “It certainly appears that an already muted market has softened since the ending of the stamp duty concession on 24 March, which clearly bought some activity forward,” he said.
Archer’s firm expects property values to fall by about 3% by the end of 2012.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Not only are we far from a sustained recovery in the housing market, there is now an even bigger problem on the horizon in the shape of the eurozone crisis. The cross-border nature of banking means UK banks cannot remain immune to what happens in the eurozone.”
There are already signs of lenders tightening criteria and making it harder for borrowers, and Harris said this could continue.
“Financial markets are unsettled, which is pushing up funding costs. Lenders have already indicated they have less appetite to lend and, if the crisis continues, it will be even harder to get funding. Mortgage rates have started edging upwards and we expect this to continue,” he said.
David Whittaker, managing director of buy-to-let specialist Mortgages for Business, predicted that monthly lending would continue to fluctuate between growth and decline over the coming months.
“Events such as the jubilee and Olympics will cause a slowdown in activity over the summer, and mounting concerns over the financial tragedy playing out in Greece will increase nervousness among both lenders and borrowers should contagion spread.”