Homeowners are choosing to pay down debt according to data from the British Bankers’ Association (BBA).  Demand for remortgages has failed to increase steadily despite low interest rate offerings from lenders.  The value of net mortgage lending increased by only £700 million in January 2012.  The number of house purchase applications that were approved in the first month of the year was the highest level in two years.  The level was 34 per cent higher when compared to the first month of 2011.  Much of the increase is credited to those looking to beat the stamp duty holiday that will end in March.  Remortgage approvals remained mostly unchanged and at the same level as previous months. 

David Dooks, statistics director with the BBA, remarked,  “January saw the high street banks approve more mortgages for house purchase than of late, despite low household confidence, as some people try to complete transactions before the stamp duty holiday ends in March. Demand for unsecured personal borrowing remains low as consumers continue to repay debt.

“Business borrowing remains generally subdued as challenging trading and market conditions continue to suppress demand”.

William Hunter, director with Hunter Wealth Management, believes the stamp duty holiday is indeed responsible for the increase in buyers in January.  Mr. Hunter remarked, “Beyond March the mortgage market is likely to click back into its default mode of flat.

“Welcome though this boost is, by definition it is finite. On a positive note, this at least shows that certain focused tax measures can drive activity and stimulate a market.

“In relation to debt generally, the theme remains much the same: people are keen to manage it down. Debt, the deity of the nineties and much of the noughties, is now anathema to the man in the street.

“Only once the economy and jobs market improve will we see the property market spark in any material way.”