Lending up 60% YOY – Stamp duty changes distort figures

As predicted, the Council of Mortgage Lender’s (CML’s) latest report shows us some pretty distorted figures thanks to the April buy-to-let stamp duty changes.

CML estimate mortgage lending to be at £25.7 billion in March, a staggering 60% higher than last year.

Stamp duty tax change distorts figures

The stamp duty tax for the those purchasing a second home (including buy to let), will no longer be free of tax when buying a property under £125k. The buyer will now be subject to 3,5,8,13 or 15% tax bands, depending on the purchase price. To see if you’re affected you can check the new bandings here Gov UK.

This has, not surprisingly, resulted in an increase in property sales in March. According to CML, “… analysis suggests there was £4-£5 billion extra lending than would otherwise have been the case, which translates to about 30-35,000 more transactions as a result.

“We expect to see about 10,000 fewer mortgaged transactions each month in April, May, and June, than would otherwise have been the case, offsetting the increase in activity seen in March.”

The economy at a glance

Following a slow start, economic growth stands at 0.6% according to CML and a very mixed view on prospects for the year, “…the UK is expected to be the second fastest growing country in the G7, helped by strong domestic demand, but on the other hand, world growth is forecast to be 3.2%, which is very weak.”

Other highlights included:

  • EU referendum causing uncertainty.
  • Highest employment rate since records began.
  • Earnings increased by a modest 1.8%.
  • The inflation rate was 0.5% in March.
  • Interest rates are at 0.5% and not expected to rise anytime soon.


The housing market remains on an upward trajectory with the support of a growing economy, falling unemployment, increased wage growth and competitive mortgage deals.

House prices continue to increase as demand outstrips supply with buy-to-let and remortgages still the main drivers of lending figures and housing transaction volumes.

EU referendum

It’s thought that the EU referendum in June will also impact housing market activity in 2016.

The Monetary Policy Committee (MPC) highlighted that, “…some commercial property transactions are being postponed pending the outcome of the vote, and we also believe there will be some direct effects on residential property transactions too.”

New regulations

According to CML, “The Prudential Regulation Authority (PRA) proposed to introduce minimum standards for lenders underwriting buy-to-let mortgage contracts in March 2016.

“One of the proposal’s key points is with regard to likely future interest rates. It recommends that lenders stress test borrowers’ affordability at a minimum of two percentage points above the pay rate of the buy-to-let mortgage, or at 5.5%, whichever is higher.”

Henry Knight, Director, Springtide Capital added: “The increased housing market activity has also been felt at Springtide Capital, we predicted that the stamp duty tax change would have an impact and it certainly has. Despite distorted figures, it’s positive that the housing market is experiencing a period of growth, let’s hope the EU referendum doesn’t dampen it.

“The proposed increased stress tests along with the tax changes are bound to have some impact on the buy-to-let market, however we anticipate a small correction opposed to anything more dramatic. The bottom line is that people still want to own property as a long term investment”.