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The number of homebuyers not paying stamp duty doubled in September following the government's decision to raise the threshold to £175,000, figures showed today.
The temporary increase enabled 51% of homebuyers to avoid stamp duty in September compared with 22% in the same month last year, the Council of Mortgage Lenders (CML) said today.
But despite the government's efforts to kick-start the market, the number of mortgages taken out for house purchases fell to a record low, with just 35,000 new loans approved during the month.
New loans for homebuyers were down 15% on August's figure and have slumped since last September when lenders approved 80,000 such deals, the CML said.
The number of house sales has plunged since the impact of the credit crunch first started to impinge on buyers last autumn. The CML said the value of mortgages approved for purchases had dropped to £5bn over the month, compared with £16.2bn in August last year.
The CML's director general, Michael Coogan, said: "While house purchase activity has reached exceptionally low levels, it is encouraging to see transaction costs lowered for a larger proportion of borrowers. The government should consider what other measures can be brought forward to enable the market to transact more easily.
"Banks and building societies do want to support homeowners, but they have limited funds available and are, quite reasonably, taking a prudent approach to risk. If the pricing and volume of interbank lending continues to improve, this should help the flow of mortgage lending."
Prices forced down
Earlier today, the Royal Institution of Chartered Surveyors (Rics) said its members had seen sales slump to around two a month in some areas of the country, and this lack of demand is likely to force house prices down further in coming months.
This decline has pushed down the value of the average mortgage taken out by buyers entering the market for the first time, the CML figures show.
In September, the average first-time buyer loan dropped to £104,500, down from £108,000 in August and well below the peak of £119,250 it reached in July 2007.
Although homes are now more affordable for first-time buyers, their numbers have also plummeted - down from 28,200 in September last year to 13,400 this year.
Remortgage approvals also fell by 15% in September, with 62,000 borrowers switching loans compared with 74,000 in August.
Some of the fall has been driven by mortgage lenders seeking to reduce the amount of risk on their books.
Over the past few months many lenders have pulled their larger loans, reserving their best deals for borrowers with at least 25% equity in their property and making remortgaging unattractive, and sometimes even impossible, for those with less.
The CML said the value of remortgaging in September had fallen to £8.5bn compared with £11bn a year earlier.
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