Mortgage lending rockets in March 2016 as stamp duty tax changes prompt a borrowing spree

Jake Cordell
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Mortgage lending climbs even higher in March 2016 in a scramble to beat Osborne's tax surcharge
Mortgage lending climbs even higher in March 2016 in a scramble to beat Osborne's tax surcharge (Source: Getty)

Mortgage lending ballooned in March as landlords and investors piled into the property market to beat a slew of tax changes which came into effect at the start of April.

A total of £25.7bn was borrowed for home purchases in March, according to figures released by the Council of Mortgage Lenders (CML) this morning - 43 per cent more than the £18bn lent for mortgages in February.

It was also the highest amount borrowed during the month of March since 2007, the CML said, as it pointed out that the introduction of the three per cent stamp duty surcharge for second home purchases would cool the market for the rest of the year.

Month Gross mortgage lending
March 2015 £16.2bn
February 2016 £18bn
March 2016 £25.7bn

“The distortion caused by this stamp duty change appears to be larger than any previous stamp duty change we’ve seen," said Mohammad Jamei, economist at CML.

“As a result, we expect there will be about 10,000 fewer mortgaged transactions each month in the second quarter of 2016 than would otherwise have been the case, offsetting the increase in activity seen in March,” he added.

Read more: The UK needs more homes not more taxes

Fearful of a soaring property market, the government has introduced a number of tweaks to stamp duty and the rules for buy to let landlords.

In December 2014, the chancellor abolished the so-called "slab" system in favour of a progressive rate of stamp duty. This raised the top headline rate of stamp duty from seven per cent to twelve per cent, and increased the amount of tax payable on properties worth more than £937,500.

Earlier this month, a new three per cent stamp duty surcharge came into effect for anybody buying a second home, and, in further measures aimed at cooling the buy to let sector, the Bank of England announced new lending restrictions for landlords.

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