Latest figures show mortgage lending was up 23% compared with December 2014, with demand for property higher than expected in runup to Christmas.
Mortgage lending fell in December, but was 23% higher than a year earlier, capping a busy six months in the housing market.
Figures from the Council of Mortgage Lending (CML) show the amount loaned by banks and building societies before repayments hit £19.9bn during the month, well above the £16.2bn recorded the previous December.
The figure brought the estimated total for the year to £220.3bn – an 8% increase on 2014 and the highest annual gross lending level since 2008.
The housing market had a slow start to the year as uncertainty over the outcome of the election deterred buyers and sellers. In the second half of the year, however, buyers returned.
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Gross mortgage lending for the fourth quarter of 2015 was an estimated £62.3bn, the CML said. This was a 1% increase on the third quarter, and a 23% increase on the fourth quarter of 2014.
CML economist Mohammad Jamei said lending had ended the year stronger than it started.
“The low inflation environment, along with real wage growth, an improving labour market and competitive mortgage deals all helped to underpin demand,” he said.
“Having said this, the upside potential looks limited over the near-term, as the supply of existing and new properties on the market remains weak, and affordability pressures weigh on activity. There is an added element of uncertainty as we wait to see the impact of tax changes on the buy-to-let sector.”
The figures are backed up by the latest monthly survey by the Royal Institution of Chartered Surveyors (Rics), which found the market was “unusually buoyant” in December.
It suggested this was down to the mild weather and a flurry of interest from investors keen to buy before tax changes in April.
From 1 April, people buying additional properties, such as buy-to-let and second homes, will pay an extra three percentage points above current stamp duty rates.
Rics said demand for properties had reached a three-month high and was more robust than expected in the runup to Christmas. Sales activity was boosted by the unseasonably mild weather, with buyers and sellers rushing to seal deals before the holidays started, it added.
Simon Rubinsohn, chief economist at Rics, said: “The housing market experienced an unusually buoyant December.
“Those in the industry have been speculating that this is the result of the chancellor’s announcement last November. Potential buy-to-let investors are looking to pick up properties before the increased stamp duty levy comes into force in April. If that is the case, then we can expect to see the housing market heating up further over the next few months.”
The Rics report also found that house prices in London, the south-east and East Anglia look set to rise by a further 5% a year for the next five years, compared with average price increases of 4.5% a year expected across the UK.
Some 62% of surveyors said homes in the south-east were already either expensive or very expensive, while 57% of surveyors in London took the same view.
By contrast, 100% of surveyors in Northern Ireland and 92% from the north of England believed homes in their areas offered fair value for money.
Jeremy Leaf, former chairman of Rics and an estate agent in north London, said: “The housing market was busy towards the end of last year, a trend that has continued into this one.
“However, as the CML suggests, this is not likely to be a market that is going to run away with itself – we expect things to settle down from mid-March when the market will find a new level, as it will be too late for investors and second-home buyers to complete before 1 April to avoid higher stamp duty.”
Leaf added that he had seen demand split “roughly equally” between buy-to-let investors and first-time buyers wanting to take advantage of the current crop of competitively priced mortgages.