The number of mortgages approved for house purchases halved in January as a result of the end of the temporary stamp duty holiday in December, according to the Council of Mortgage Lenders (CML).
House purchase loans fell by 49 per cent in January to 32,000, worth £4.7bn.
The CML’s figures supports recent data which has shown a slump in the housing market since the start of the year. Both the Halifax and Nationwide Building Society reported a fall in house prices in February of 1.5 per cent and 1 per cent, respectively.
According to the CML, the first-time buyer market was hit the worst with the number of first-time buyer loans approved in January down by 54 per cent to 11,300. This was down from 24,800 first-time buyer loans in December.
Following a 63 per cent increase in the number of first-time buyer transactions for properties in the £125,000 to £175,000 band in December, the number of equivalent transactions fell by 80 per cent in January.
“It was a quiet start to the year,” said Michael Coogan, director general of the CML. “We expect lending over the coming months to remain weak as uncertainty over the state of the economy and the upcoming election are likely to continue to hold back housing market activity.”
The number of remortgage loans also fell in January, down 15 per cent to 24,000 loans. The CML said this was the lowest monthly level of remortgage activity for the last eight years of available data.
“The latest figures from the CML demonstrate what an impact the stamp duty holiday had on the market. A drop of over 50 per cent in first-time buyers securing a mortgage in January certainly sounds worrying,” said Nigel Lewis of FindaProperty.com.
Lewis said it was important that the government looked to help the first-time buyer market. “We’ve seen significant demand for properties from this level of buyer and it is important that demand is assisted. If the government will not reconsider new measures for first-time buyers then this feat falls to the lenders to help this vital part of the market.”