The number of mortgage approvals in the UK has rocketed by 33% in January this year from the same month a year ago, according to the British Bankers’ Association (BBA).
Most of the new mortgages have been approved for people wanting to purchase second homes and buy to let properties in a bid to beat new taxes which begin in April.
This has also led to the highest gross mortgage amount loaned since the financial crisis began in 2008.
When the figures are broken down, remortgaging has increased by 42% with homeowners taking advantage of rising house prices while those wanting to buy property saw mortgages rise by 27%.
Figures show that £13.6 billion was loaned last month which is 38% higher than January 2015 – and the highest biggest monthly gross lending recorded since 2008.
Rapid growth in mortgage approvals
The BBA says that one reason for the rapid growth in mortgage approvals and lending is that lending dropped significantly in the months before last year’s general election.
Now buyers are wanting to beat a 3% stamp duty hike on buy to let and second homes which comes in for property purchases in England and Wales from April. The government says the new tax levy will raise an extra £1 billion by 2021.
The BBA’s chief economist, Richard Woolhouse, said: “There’s been a significant rise in mortgage borrowing which has been driven, in part, by borrowers wanting to get ahead of stamp duty increases for second home and buy to let buyers.”
The figures from the BBA come hot on the heels from statistics published by the Council for Mortgage Lenders which also revealed that January’s lending was an eight-year high for mortgage borrowing.
Bridging finance boom sparked by tougher mortgage criteria
Meanwhile, mortgage brokers in the UK are increasingly looking to offering clients bridging loans after they have failed to land a mortgage, according to MTF.
In the fourth quarter of 2015, 86% of brokers who were asked said they had seen a rise in bridging loan volume. That’s up from 76% for the previous quarter.
Nearly all mortgage brokers questioned said they had been unable to find a mortgage for a client in the last quarter of 2015 with affordability being the main barrier.
Now, 61% of brokers say that bridging finance is an alternative source for funding to fill a liquidity shortfall.
In addition to affordability, 27% of brokers said poor credit history was an issue and for 18%, property being down valued was also an issue.