UK mortgage approvals rise as buyers race to beat stamp duty changes

The number of mortgages approved by the UK banking sector rose unexpectedly in December, according to new data, suggesting buyers are looking to beat upcoming changes to stamp duty.

The Bank of England’s figures showed that 66,500 mortgages were approved last month, which was up from 66,100 approvals in November.

Economists had expected the number of approvals, a good indicator of future borrowing, to fall to 65,000. Approvals for remortgaging, however, decreased by 700 to 30,500, falling for a second consecutive month.

Analysts had expected to see another fall, particularly as consumer confidence has suffered in recent weeks and mortgage rates have crept higher.

“It’s surprising to see mortgage approvals rise in December given rising mortgage rates and the challenging economic outlook,” Karim Haji, global and UK head of financial services at KPMG said.

But the figures suggest that consumers are proving more resilient than expected, perhaps bolstered by rising incomes and healthy household balance sheets.

“There is little evidence in December’s money and lending figures that the recent deterioration in consumer sentiment is having a big influence on households’ financial decisions,” Ashley Webb, UK economist at Capital Economics said.

Some commentators also suggested that first-time buyers were looking to avoid April’s stamp duty changes, which were announced in October’s Budget.

“This heightened activity was no doubt driven, in part, by buyers keen to make their move ahead of the impending stamp duty deadline,” Jonathan Samuels, chief executive of Octane Capital said.

Currently, no stamp duty is paid on property purchases up to £425,000 for first-time buyers, but this relief is set to end meaning first-time buyers will face the same stamp duty rate as other buyers.

Alice Haine, personal finance analyst at Bestinvest, said the decision will “catalyse buying activity in the short-term,” but warned the boost to the housing market would be short-lived.

Recent figures from Zoopla showed that buyer demand was up 13 per cent year-on-year in January thanks to the looming tax changes, its strongest start in three years.

Consumer credit also increased slightly compared to the previous month, climbing to £1bn from £900m previously.

However, the annual growth rate in consumer borrowing decreased a little to 6.5 per cent, from 6.6 per cent previously.

“Today’s data suggest the weakness in the economy at the end of last year didn’t materially weigh on households’ borrowing and saving decisions in December,” Webb said.