Mortgage approvals in the UK reached a two-year high in January as savvy buy-to-let investors rushed to beat the stamp duty tax increase.
According to the Bank of England, lenders agreed to advance 74,581 mortgages, breaking a two year old record from January 2014. To put this in context, in December 71,335 loans were agreed.
The original forecast by economists expected 74,000 mortgages agreed. Net mortgage lending climbed to a total of £3.7bn (US$ 5.1bn).
These latest figures strengthen forecasts that investors in rental property are buying up property before April, when a new legislation will come into place in form of a stamp duty surcharge on buy-to-let investments and second homes.
Low interest rates and record employment levels are keeping demand for houses too high to be matched by supply.The effective interest rate on new secured loans dropped 6 basis points to 2.49% in January. The rate on outstanding mortgages went down 3 basis points to 2.96%. Loans approved for remortgaging increased to 42,228.
Net lending to consumers went up to £1.6bn, with loans on credit cards reaching the highest since May 2008. Consumer credit rose by 9.1% from a year before, the fastest pace in 10 years.
Business lending to non-financial firms rose by an all-time high of £6.3bn, of which smaller companies accounted for only £500m.
M4 is a broad measure of money supply and stayed unchanged month-on-month, whilst rising 0.8% from the year earlier. An underlying measure of M4 went up 4.3% on a 3-month annualised basis.
The BOE also stated that overseas investors sold a net £6.3bn of gilts in January, a drastic increase from net sales of £1.7bn in December. These figures represent the biggest net disposal since March 2014 and may be seen as a reflection of concerns regarding a “Brexit”, a British exit from the European Union.
Source: Bloomberg
