Mortgage lending in the UK dropped significantly in April, the Council of Mortgage Lenders (CML) said today.
Lending for house purchases fell by 30% compared with the previous month, to 36,000 loans. The most significant decrease was in lending to first time buyers, with loans for buyers purchasing their first home down 48% to 12,600.
Paul Smee, director general of the CML, said that the figures for April confirm the expected effect of the end of the stamp duty holiday on UK mortgage lending.
The stamp duty exemption, for first-time buyers who bought homes costing between GBP125,000 and GBP250,000, ended on 24 March and leading up to that deadline there was a rush of first-time buyers.
In April the drop-off in activity for first-time buyers was seen mainly among properties that would have qualified for the exemption in March but were subject to stamp duty in April. Purchases of properties valued between GBP125,000 and GBP250,000 fell by 70% in April compared to March. In contrast there was an 11% drop in purchases of homes valued at GBP125,000 or below, which are still exempt from stamp duty, and first-time buyer purchases of properties over GBP250,000 fell by 5%. These higher value homes were not eligible for the exemption in either case.
The trend towards cheaper properties in April meant that the average loan amount decreased from GBP117,000 in March to GBP98,000 in April and first-time buyers typically borrowed 3.12 times their income, down from 3.34 in March.
Smee added that with economic uncertainty continuing it seems unlikely that there will be any significant rise in lending in the coming months. However, recent CML research shows that 81% of people still aspire eventually to own their own homes, so over the longer term the demand still exists.