Mortgage lending for home purchases in London tumbles

The number and total value of mortgages taken out by homebuyers in London fell sharply during the third quarter of the year, as affordability issues, uncertainty surrounding Brexit, and stamp-duty rises for expensive and investment property weaken the market.

Homebuyers in London took out 19,200 loans during the three months to the end of October, said the Council of Mortgage Lenders (CML). That was a 12% rise compared to the second quarter – but down 16% on same quarter in 2015. And the value of these loans during the period, £6.2bn, was up 15% compared to the previous quarter, but down 14% compared to the same quarter a year before.

"This is the first quarterly data after the EU referendum but it is unlikely to be very reliable as an early indicator of how the market in London will be affected," said Paul Smee, director general of the CML. "It does not appear that there will be drastic change in activity for the foreseeable future, in a London market which has been stable for several years."

House prices in London have risen so sharply in recent years, driven by a severe supply shortage, that many aspiring first-time buyers are struggling to get onto the property ladder – either unable to save a sufficient deposit, or mortgage rules mean they cannot take on the scale of debt needed.

Demand at the top of the market was curbed by a hike in stamp duty on homes worth over £1m at the end of 2014, as well as other tax rises, such as a levy on homes owned by companies, called the Annual Tax on Enveloped Dwellings, which are worth more than £500,000. Moreover, an additional 3% rate on top of stamp duty for purchases of

By the same token, an additional 3% rate on top of stamp duty for purchases of extra property has hit buy-to-let investors, while landlords have faced other tax rises, such as an ending to relief for mortgage interest costs.

Overhanging all of this is the economic uncertainty, sparked by the vote for Brexit in the 23 June referendum on the UK's membership of the EU. Formal talks to leave the EU begin when the government triggers Article 50 of the Lisbon Treaty, which it said it intends to do by March 2017.

There is then a two-year time limit on those talks before the UK exits automatically. The future relationship between the UK and EU is yet to be determined, leaving many open questions around trade and investment, clouding the outlook for the economy.

Number of loans for house purchase and remortgage

Value of loans for house purchase and remortgage

Source: CML