In January UK banks approved the highest number of mortgages for almost 2 years according to the British Bankers’ Association. It is speculated that the rising request for loans could be due to new tax regulations coming into force: from April, buy-to-let and second home buyers will have to pay an additional 3% charge on the purchase price. 80,285 mortgages were approved in total in January. This was a third more than 2015 and is the first time since January 2014 that approvals have exceeded 80,000 in a single month.

Martin Beck, senior economic advisor to the EY ITEM Club, comments:

“Mortgage approvals have surged to 74,581 in January, the highest figure for two years. Meanwhile, net mortgage lending of £3.7 billion was only just short of November’s seven-and-a-half year high. January’s pickup in mortgage activity had been flagged by last week’s British Bankers’ Association (BBA) data and appears to be a classic case of forestalling. April’s increase in stamp duty on buy-to-let properties and second homes seem to be driving a rush to complete transactions. We would expect the February and March figures to be similarly strong, with activity then dropping off again once the new stamp duty rate is in place.

“The Financial Policy Committee (FPC) has intimated that it is unlikely to intervene in the buy-to-let mortgage market until after it has been able to judge whether the Chancellor’s policy to increase stamp duty and change the tax relief for landlords on mortgage interest have been sufficient to cool the market. Therefore, we do not expect any action in this area at the FPC’s March meeting.

“Net unsecured lending was also strong at £1.6 billion, an outturn which came as little surprise given January’s strong retail sales figures. And annual growth in unsecured lending of 9.1% was the strongest in a decade.

“The Bank of England has expressed increasing concern about the frothiness of the lending data in recent months, so while the FPC may not intervene in the buy-to-let market, broader action is possible.”