Mortgage Lending Dips After Stamp Duty Spike

The number of mortgage approvals has fallen to its lowest level in over a year, after the rise in stamp duty rates took effect in April.

A total of 40,104 mortgages got the go-ahead in April, down from 43,854 in March, according to a report by the British Bankers' Association.

On 1 April, stamp duty rates increased by three percentage points for second home buyers, such as buy-to-let investors.

Dr Rebecca Harding, chief economic advisor at BBA, said: "As expected, growth in mortgage lending has fallen back sharply on last month, proving that March’s results were just a stamp duty spike.

"Net (LSE: 0LN0.L - news) mortgage borrowing is nevertheless 3% higher than a year ago."

The BBA's figures show that deposits into ISAs grew by £3bn between March and April, following the introduction of the personal savings allowance. The figure is less than half the £6.2bn invested into ISAs during the same period in 2015.

The allowance means a basic rate taxpayer can earn up to £1,000 in savings tax-free, while a higher rate taxpayer can earn up to £500 tax-free.

Dr Harding said: "The fact that personal deposits are growing while ISA deposits continue to under-perform suggests consumers are using easy-access savings while the outlook for the economy remains uncertain."

Some housing market reports have suggested some house purchases were brought forward in 2016, taking place earlier to avoid April's stamp duty increase.

Howard Archer, chief UK and European economist at IHS Global Insight, said: "The strong suspicion is that housing market activity will be pressurised in the immediate term by a combination of weakened interest from buy-to-let and second home sectors as well as heightened concerns and uncertainties over the UK economic outlook."