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Lloyds Banking Group recorded its biggest-ever day of mortgage lending in March as UK homebuyers rushed to take advantage of a stamp duty holiday before the window closed.
The high-street bank on Thursday said it lent to 20,000 first-time buyers in the first three months of the year, and sold a record 5,000 mortgages to buyers completing on March 27. Lloyds’ total mortgage book grew by £4.8bn to £317.1bn over the quarter.
The rush came days before stamp duty — a tax levied on property purchases — rose back to pre-2022 levels on April 1. The changes mean that first-time buyers will now pay the tax on properties worth £300,000 or more, rather than £425,000 previously, with similar changes for non-first time buyers.
Lloyds’ chief financial officer William Chalmers said the boost in mortgage lending was likely to subside throughout the rest of the year, as many customers had brought forward planned purchases.
“I’d be surprised if mortgage growth is quite as strong going into quarter 2 as it was in quarter 1 because of that bring forward effect,” he said.
Homebuyers have also been helped by easing mortgage rates in recent weeks as lenders have cut prices in the wake of US President Donald Trump’s tariffs. The average two-year fixed residential mortgage rate was 5.18 per cent on Thursday, according to data provider Moneyfacts, down from 5.2 per cent on Wednesday.
“[Mortgage] rates have somewhat come down over the course of recent weeks as the expectation of tariff-induced lowdown in economic projections [has] caused people to think that maybe rates will be reduced faster than previously thought,” said Chalmers.
His comments came as data released by the Bank of England on Thursday showed that mortgage approvals fell for a third consecutive month in March, as the rush to beat the stamp duty deadline died down rapidly.
Net mortgage lending jumped from £3.3bn in February to £13bn in March. But mortgage approvals for house purchases — reflecting sales that have been agreed but will still take about two months to complete — fell from 65,100 in February to 64,300 in March.
Lloyds’ first-quarter profits fell 7 per cent year on year to £1.5bn — in line with expectations — as it set aside more money than expected for bad loans in anticipation of the economic impact from US tariffs. Revenues rose 4 per cent year on year to £4.4bn.
The bank set aside £309mn for bad loans, higher than analysts’ expectations of £279mn, as it added a £35mn provision to account for changes in the economic outlook linked to US tariffs.
Lloyds, seen as a bellwether for the UK economy, indicated that overall credit quality remained resilient, with “stable and benign credit performance in the first quarter”.
Chalmers said Lloyds’ direct exposure to UK businesses that export to the US represented less than 1 per cent of its total loan book but that executives remained “vigilant for any potential second order impact” to the UK economy.
The bank’s net interest margin — the difference between the interest it charges on loans and the rate it pays on customer deposits — rose to 3.03 per cent, from 2.97 per cent in the previous quarter. The boost was driven by so-called structural hedging, which the bank uses to smooth the impact of falling rates on its margins.
Lloyds did not make any additional provisions linked to potential liabilities from its motor finance business, having previously set aside more than £1bn to cover the costs of a probe into the potential mis-selling of car loans.
The industry is awaiting a Supreme Court decision on whether it was lawful for banks to pay commission to car dealers if customers had not given informed consent for such an arrangement.
Lloyds is entering the final stages of a £4bn investment plan to develop new revenue streams that are less closely tied to the interest rate cycle. It has announced 316 branch closures and 500 job cuts so far this year.
