End of stamp duty holiday hits property sales

Date released by the Council of Mortgage Lenders shows that, in January, house purchase loans fell by more than three times the decline in remortgages, demonstrating the effect that the end of the stamp duty holiday in December has had on the mortgage market.

There were 49% fewer house purchase loans in January than in December but only 15% fewer remortgage loans. However, the 32,000 loans for house purchase, worth £4.7 billion, were up from the low of 23,000 (worth £3.1 billion) seen in January 2009. Conversely, the 24,000 loans for remortgage, worth £3 billion, were down from 45,000 (£6.2 billion) a year ago. This is the lowest monthly level of remortgage activity – both by number and value – in eight years of available data.

The group to see the largest drop in house purchases was first-time buyers, with a fall of 54% (55% by value) from December to January – reflecting the fact that a high proportion would usually fall into the £125,000-£175,000 property value category and rushed through their purchase to complete in December.

There were 11,300 first-time buyer loans, worth £1.3 billion, in the month, down from 24,800 (£2.9 billion) in December 2009, but still up from 8,600 (worth £900 million) in January 2009.

Following a 63% increase in the number of first-time buyer transactions for properties in the £125,000-175,000 band in December, the number of equivalent transactions fell by 80% in January – to account for just 19% of all first-time buyer loans, down from a record 42% in December. Compared to a year earlier, the number of first-time buyer loans in this category was down 22%.

A similar picture can be seen amongst home movers. This group saw a 49% increase in transactions in the £125,000-175,000 category in December and a 71% drop in January – while transactions across the other price bands fell by a more modest 36% in the month.

Commenting on the data, CML director general Michael Coogan said:

“It was a quiet start to the year. Lending volumes in January were low, but we had predicted this would happen due to the end of the stamp duty holiday distorting December’s figures.

“When December and January data are taken together, they show little change in underlying market conditions compared with recent months, with activity still slow but well up on the lows of a year earlier. We expect lending over the coming months to remain weak as uncertainty over of the state of the economy and the upcoming election are likely to continue to hold back housing market activity.”