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Despite April fall, gross mortgage borrowing up 12% on 2015

High street bank figures just released for April reveal that while last month was a slower month for household borrowing, gross mortgage lending was still up 12% on April 2015.

In its report, April 2016 high street bank figures, the BBA has revealed that in spite of a sharp month-on-month decline in lending, due to the introduction of a 3% Stamp Duty surcharge on second homes and buy to let properties, gross mortgage borrowing hit £12bn last month and was 12% higher than April 2015.

April’s net mortgage borrowing figure was 3% higher than last year.

In terms of consumer credit, the BBA has recorded annual growth as being at 5%, which they say reflects improved confidence, and in the case of personal loans and overdrafts, favourable interest rates.

However, following three months of increased activity, which was again due to a spike in lending prior to the change in stamp duty, house purchase approval numbers were down by 6% on April 2015.

Remortgage approvals were 16% higher in April compared to a year ago and other advances were up 25% year on year.

Business borrowing by non-financial companies rose by £300m in April this year. This is comparable to March’s growth, and is the fourth consecutive month to reveal an increase.

Capital market issues by non-financial companies fell by £1.7bn in April, but a total of £21.9bn (net) was raised in the year to April.

The BBA found that this alternative finance compares with a reduction in bank borrowing of £0.2bn (net) over the same period.

Examining trends in net deposits, the BBA also found that personal deposits have been growing more strongly in recent months, with annual growth rising to 4.8% in April.

ISA deposits, however, only grew by £3.0bn over March and April, compared with £6.2bn during the same period last year.

Non-financial companies’ deposits increased by an average of around £2-3bn a month in 2015 but have fallen back in the first four months of 2016, taking their annual growth rate down from around 10% in 2015 to about 4% now.

David Whittaker, managing director of Mortgages for Business, said:

“Changes to stamp duty led to a hugely busy first quarter for lenders, as landlords sought to beat the clock and save thousands of pounds. Mortgage lending in 2016 has been frontloaded as a result of this, and the second quarter will be quieter. A slight tapering off of lending in April reflects a less frenetic marketplace.

Despite this fall, lending remains higher than a year ago, which illustrates that borrower appetite continues.

“Strong returns resulting from high demand for rental accommodation will keep buy-to-let activity strong.

There is still plenty of profit to be made, but landlords must ensure that they factor additional stamp duty into their financial planning along with the looming tax relief change.”


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