New figures have shown that UK mortgage approvals fell in February marking a continued slow start to the year. The number of mortgages fell by over 1,000 to 47,094, the figures showed. 

This was the third consecutive monthly fall and came after a sharp but expected drop last month when the end of the stamp duty holiday reduced the number of buyers in the market. 

I have noted here recently that several sets of figures have indicated that the housing market was hit at the start of the year owing to the end of the temporary stamp duty relief and the poor weather. 

However, new figures from the British Bankers’ Association and now the Bank of England suggest this hangover has continued. 

The Bank of England’s figures showed the number of mortgages approved for house purchases was lower than the average of the previous six months, which stood at 55,130.This was down 21% on the recent peak in approvals in November, and the lowest for nine months. 

In the Budget last week, Chancellor Alistair Darling said that, for the next two years, first-time buyers purchasing properties worth up to £250,000 would pay no stamp duty. 

The Bank of England’s figures showed the number of people remortgaging increased in February to 27,297, a rise from January and ahead of the monthly average over the previous six months of 25,985. 

Borrowing on credit cards and through personal loans saw its highest increase since November 2008, the Bank’s figures showed. Consumer credit rose by £528m in February, up from £349m the previous month. The February figure included a £374m increase in credit card lending and a £154m rise in other loans and advances. 

Building societies have found it tough to attract funds in recent months, as people searched for higher returns or paid off debts. But this trend reversed in February, with an increase in savings funds to the mutual sector, which includes building societies and the Co-operative Bank. 

The spectre of a double-dip recession is still hanging around the UK economy like Banquo’s ghost. The news that the number of mortgages is continuing to fall will increase the pessimism but in itself does not tell the whole picture.  

Many analysts still believe that the next sets of figures will be much brighter, with sure signs of growth returning to the housing market as well as other sectors of the economy. I am firmly sitting on the fence on this one. We shall have to wait and see.

In his last Budget before the election, and presumably the last of this Labour government, the chancellor has outlined important changes to stamp duty. From 25 March first-time buyers purchasing houses worth up to £250,000 will pay no stamp duty. The holiday is scheduled to last two years.  

On the other hand, Mr Darling also proposed an increase in stamp duty on properties worth more than £1m, but this will not come into effect for some time. 

The move is a generous one from the chancellor, but he makes up for this by being very precise about what exactly constitutes a first time buyer. According to the Treasury, a first-time buyer is classed as someone who has not previously owned a property ‘anywhere in the world’.  

This means that if you don’t own your own home at the moment but you have in the past, then you are not eligible to take advantage of the stamp duty holiday. 

Those who are eligible only need to complete their sale between 25^th March 2010 and 25 March 2012 and they will not pay any stamp duty. This means that people who are already mid-way through the process of buying a house can still take advantage of the scheme. 

Unfortunately, this means that any first time buyers who have recently completed the purchase of their house will not be able to reclaim the stamp duty paid. 

Things get trickier if couples are buying together and one of them does not qualify for the scheme because they have owned property before. The guidance clearly states that in these cases stamp duty will have to be paid. However, if the purchase is made in the name of only one member of the couple then stamp duty can be avoided. 

On the one hand it must be said that this stamp duty holiday will be a real boost to those eligible and counter-balance some of the difficulties of getting mortgages and saving up large deposits required by the current economic climate.  

On the other hand, however, this is little more than a cynical political ploy by a shrewd chancellor sitting in the heart of an unpopular, discredited and almost certainly doomed government. The strict criteria by which ‘first-time buyers’ are assessed are unnecessarily stingy, to the disadvantage of couples buying together. 

Similarly, the scheme will be paid for by an increase in the stamp duty for more expensive houses, but this will not come into effect until after the election. I hope as many people as possible benefit from this scheme, but not the sneaky and cowardly government that hopes to use it to buy the votes of the disadvantaged.