The UK property market saw a dramatic spike in mortgage lending in March, as buyers raced to complete purchases before changes to stamp duty took effect in April.According to the latest Bank of England data, mortgage borrowing soared by 290% during March, reaching £13 billion which is the highest level since June 2021.
This surge was driven by homeowners and first-time buyers eager to finalise their transactions ahead of the 1 April stamp duty changes, which reduced the tax-free thresholds.In particular, the nil-rate band for first-time buyers dropped from £425,000 to £300,000, while for other buyers it fell from £250,000 to £125,000. The anticipation of these changes prompted a flurry of activity in the weeks leading up to the deadline.Lenders reported record-breaking days, with Lloyds Banking Group revealing that 27 March was their busiest day ever for mortgage completions.However, while borrowing reached its highest level, the number of new mortgage approvals, which serve as a key indicator of future activity in the housing market, fell for the third straight month.
March saw 64,300 new approvals, 800 fewer than in February. Experts suggest this dip could continue as higher stamp duty costs deter new buyers.Rosie Hooper, a financial planner at Quilter Cheviot, commented that the outlook for first-time buyers may become more challenging, especially as affordability remains a concern.Despite the drop in approvals, competition among lenders is heating up. Several banks have recently slashed rates on fixed mortgage deals below 4% and eased borrowing criteria in a bid to attract more customers. With the Bank of England widely expected to cut interest rates on 8 May, there's potential for even more competitive mortgage offers on the horizon.
Simon Gammon of Knight Frank Finance observed that the decline in interest rates has the potential to breathe new life into the housing market later in the year, assuming the UK economy stays stable and there is a reduction in global trade tensions..Meanwhile, the Bank of England also reported a slowdown in consumer credit borrowing. In March, net credit fell to £0.9 billion, down from £1.3 billion the month before, with credit card usage hitting its lowest level in nearly a year. Industry analysts believe this may reflect increasing caution among consumers as economic pressures mount.
