Property lending in the UK surged in December, latest figures show

End of stamp duty holiday bolstered lending in UK property market

Property buyers in the UK rushed to complete before the end of last year to beat the end of the stamp duty holiday, it is claimed.

The fact that gross mortgage lending surged to reach an estimated £13.7 billion in December, a 14% rise from £12.1 billion in November, shows that they were eager to avoid paying extra tax if they had completed after January 01.

The December lending figures were also up 3% on December 2008, according to the Council of Mortgage Lenders. This is the first time the annual monthly comparison has been in positive territory since October 2007. However, other than in 2008, this is still the lowest figure for December since 2001 when it was £13.4 billion.

The CML figures show that lending totalled £39.1 billion in the fourth quarter, up slightly from £39 billion in the previous quarter but down by 14% on the last three months of 2008. There is typically a 6% fall between the third and fourth quarter.

For 2009 as a whole, lending totalled £143.7 billion, slightly above the CML annual forecast of £141 billion. However, this is down 43% from £253 billion in 2008 and the lowest annual total since 2000 when it was £119.8 billion.

‘The December figure is surprisingly strong as there is typically a small decline in the month. Evidence suggests that the rise was driven by a surge in house purchase completions as re-mortgaging still remains exceptionally weak. The most likely explanation is that buyers of cheaper property wanted to complete their transactions before the end of the year to beat the end of the stamp duty holiday,’ said CML economist Paul Samter.

He warned though that as a result mortgage lending may see a larger than usual seasonal drop-off in the early part of 2010. ‘But there is every reason to expect a gradual improvement in the latter part of the year. With a gradual pickup in economic growth and wider access to credit, 2010 will almost certainly be a better year in the mortgage market than 2009,’ he added.

Mortgages will be more affordable next year, according to the Nationwide building society. It believes that the current trend for products having low interest rates will continue to make them available for more people in 2010.

Others though are warning that this week’s spike in inflation could lead to the Bank of England increasing interest rates and mortgages would follow suit.

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