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British home buyers accelerated mortgage borrowing in March to the highest level since mid-2021, as they rushed to complete purchases ahead of the expiry of government tax relief measures. However, signs of cooling demand have emerged in the weeks since, amid rising borrowing costs and global economic uncertainty.
Read More: UK House Prices Dip as Tax Break Rush Fades
According to Bank of England (BoE) data released Thursday, net mortgage lending rose by £12.96 billion ($17.27 billion) in March; the largest monthly increase since June 2021, when the UK housing market experienced a pandemic-driven boom.
The sharp rise was attributed to the April 1 expiry of a temporary tax discount for first-time buyers, as well as an increase in the stamp duty surcharge on second homes. These policy shifts triggered a wave of pre-deadline activity in the housing market, bolstered by falling mortgage rates and pent-up demand.
However, momentum appears to have faded since the start of April. Nationwide reported on Wednesday that house prices declined at their fastest pace in nearly 18 months, reflecting the withdrawal of fiscal incentives and growing buyer hesitancy.
The BoE’s data also showed a slight decline in mortgage approvals, a forward-looking indicator of market activity; falling to 64,309 in March from 65,093 in February, and undershooting consensus expectations.
Economists said the figures suggest caution is setting in among households. Net unsecured consumer credit rose by just £0.9 billion in March, down from £1.3 billion the previous month and below forecasts. This subdued borrowing reflects softening consumer sentiment, potentially linked to mounting global trade tensions.
“March’s money and lending data suggest households were starting to spend more cautiously even before the full impact of heightened global uncertainty from new US tariffs is felt,” said Ashley Webb, UK economist at Capital Economics.
In a separate release on Thursday, government data showed UK manufacturers’ exports contracted at their sharpest pace since May 2020, amid widening trade imbalances and weaker external demand.
Looking ahead, the BoE is widely expected to cut its benchmark interest rate by 25 basis points to 4.25% next week, in an effort to support demand and ease pressure on borrowers.
“Falling mortgage rates will likely fuel a rebound in activity later this year,” said Simon Gammon, managing partner at Knight Frank Finance. “But that depends heavily on the trajectory of global trade risks and domestic consumer confidence.”
The housing market remains a key barometer for broader economic resilience, as the UK navigates a delicate post-pandemic recovery complicated by volatile external conditions and shifting fiscal policy.
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