Mortgage lending 'surprisingly strong' in December

Mortgage lending jumped by 14% during December as people rushed to buy a home before the Government's stamp duty holiday ended, figures showed today.

A total of £13.7 billion was advanced during the month, up from £12.1 billion in November, the Council of Mortgage Lenders (CML) said.

Lending was also 3% higher than it was in December 2008, the first time the annual comparison has been positive since October 2007.

The CML said the figure was "surprisingly strong" for December, when lending is usually down on November's level as the housing market slows down ahead of Christmas.

It attributed the rise to increased demand as people buying properties costing up to £175,000 rushed to complete their purchases before the threshold at which stamp duty kicks in returned to £125,000 at the beginning of this year.

CML economist Paul Samter said: "Evidence suggests that the rise was driven by a surge in house purchase completions as remortgaging still remains exceptionally weak.

"The most likely explanation is that buyers of cheaper property wanted to complete their transactions before the end of the year to beat the end of the stamp duty holiday."

He warned that if there had been a "bunching" in sales as people rushed to beat the deadline, there could be a larger than usual drop-off in lending in the early part of this year.

A total of £143.7 billion was advanced during the whole of 2009, 43% down on 2008, and the lowest annual figure since 2000.

However, lending for the year was slightly ahead of the CML's forecast of £141 billion.

The group expects a gradual improvement in lending levels during the latter part of this year.

Mr Samter said: "With a gradual pick-up in economic growth and wider access to credit, 2010 will almost certainly be a better year in the mortgage market than 2009."