Mortgage lending flies to best start since 2008

Levels of UK mortgage lending declined 9% in January compared to the previous month, yet it was the best start to the year since 2008.

Gross mortgage lending of £17.9bn in the month was 20.8% higher than January 2015, data from the Council of Mortgage Lenders showed, but down from £19.8m in December in line with mortgage lending tending to be significantly lower in January than the month before.

The CML predicted limited upside potential going forwards, as the supply of houses for sale remains constrained and affordability pressures weigh on buyers.

Economists believe April's new tax changes in the buy-to-let sector are adding an element of uncertainty to the market, possibly creating an upswell in demand ahead of the deadline.

The CML's Mohammad Jamei said real wage growth, an improving labour market, competitive mortgage deals, and government schemes were combininig to supporting continued housing market growth.

Reduced expectations of an interest rate hike may well also be boosting housing market activity, suggested Howard Archer of IHS Global Insight.

"With expectations of an interest rate hike any time soon recently fading markedly, there may be an easing back in the number of people feeling a need to re-mortgage in order to lock in low interest rates before they start to rise."

A recent survey from Markit showed public expectations of a interest rate hike within a year fell back to 46% in February from 71% in January and the number expecting an interest rate hike within six months dropped to 22% from 40%.

Providing a perspective from street level, north London estate agent Jeremy Leaf, former RICS chairman, said he expects the market to settle down next month.

"The housing market was busy towards the end of last year, a trend which has continued into this one. However, as the CML suggests, this is not likely to be a market that is going to run away with itself - we expect things to settle down from mid-March when the market will find a new level, as it will be too late for investors and second home buyers to complete before 1st April to avoid higher stamp duty."

He also surprisingly found that demand for homes was currently split roughly equally "between investors keen to beat the 3% stamp duty surcharge from April and first-time buyers wanting to take advantage of additional property choice and competitively-priced mortgages before interest rates start to rise".