According to the Council of Mortgage Lenders (CML), the number of loans lent on properties costing between £125,000 and £250,000 fell by 70 per cent in April compared to the previous month, due in part to the end of the stamp duty holiday.
Economists said that the fall demonstrates just how precarious the property market is and predicted that house prices will fall this year.
The Government had exempted properties priced between £125,000 and £250,000 from the 1 per cent sales tax in an effort to boost sales at the bottom end of the housing market. The stamp duty holiday, which ran from 2010 to March 31 this year, saved the average buyer around £1,800.
The CML said that the number of mortgages lent specifically to first-time buyers between March and April dropped by 48 per cent in April due to the policy ending.
Total mortgage lending in April fell by over £2 billion to £5.3 billion compared to the previous month. The number of home loans made was 36,000, down from 51,600 in March.
Paul Smee, director general of the CML, said that April’s sharp decline was “expected” after the stamp duty holiday finished. However he said that mortgage lending to first time buyers is likely to remain subdued in the coming months.
“Given the economic uncertainty, any significant pick up in lending in the coming months seems unlikely,” said Mr Smee.