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Mortgage borrowing soars yr-on-yr

Mortgage borrowing soars yr-on-yr

Category: Mortgages

Updated: 26/04/2016
First Published: 26/04/2016

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

New figures released by the BBA (British Bankers' Association) show that gross mortgage borrowing soared to dramatic heights in March following the scramble by buy-to-let and second home purchasers in the run-up to the April stamp duty changes.

BTL pushes up borrowing

The data shows that gross mortgage borrowing in March stood at a whopping £17.1 billion, up from £13.2 billion in February and a massive 64% increase on March last year. This marks the highest borrowing level seen since April 2008, and has chiefly been attributed to the demand from borrowers looking to avoid the new 3% stamp duty surcharge, which was introduced on 1 April.

This growth in demand is also reflected by the number of mortgage approvals, which were up 20% year-on-year. House purchase approvals had grown by 14% from March 2015, while remortgaging approvals increased by an impressive 25%.

While demand from would-be landlords can certainly be seen to be behind the growth in the mortgage market, matters have also been helped by a continuing downward slide in mortgage rates, as Charlotte Nelson of Moneyfacts points out:

"The fact that mortgage borrowing has increased year-on-year yet again is likely to be the result of falling mortgage rates across the market. For example, the average two-year fixed mortgage rate has decreased from 2.97% to 2.55% in just 12 months, while the average five-year fixed rate has dropped from 3.53% to 3.19% over the same period."

Moneyfacts' research has also revealed that rates slid downwards in the buy-to-let market as providers rushed to secure the business of those who were hoping to complete their purchases ahead of the April deadline. For instance, the average two-year fixed rate buy-to-let mortgage now stands at 3.29%, down from 3.59% last year, while the average rate for a five-year deal has fallen from 4.37% to 4.00% over the same period.

Time to get involved?

The April deadline may have come and gone, but as the above shows, rates in the mortgage market are still highly attractive – but they won't remain this way forever. If you want to get in on the buy-to-let action, you need to act fast and secure yourself the best mortgage deal. You can check out our buy-to-let mortgage best buys to help steer you in the right direction. However, while this sector is certainly not lacking in appeal, Charlotte is right to highlight the need to be cautious: "Anyone seeking to enter this sector should remember that it's not without its risks. Interested borrowers would therefore be wise to seek the advice of an independent financial adviser to find out if this is the best investment for them."

What next?

Check out the buy-to-let best buys to see if you can fulfil your hopes of becoming a landlord

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.