Lending totalled £19.9bn in December, decreasing 3% from November’s figure of £20.5bn, but rising 23% compared to December 2014, which saw £16.2bn.
Gross mortgage lending for Q4 of 2015 was estimated at £62.3bn, a 1% increase on Q3 and a 23% increase on Q4 2014.
Mohammad Jamei, economist at the CML, said the annual figure was slightly higher than expected.
He added the low inflation environment, real wage growth, an improving labour market and competitive mortgage deals have all helped drive demand.
“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 tax changes, announced as part of the Summer Budget, mean the tax relief landlords can claim on their monthly mortgage interest repayments will in future be reduced to 20%, regardless of their personal top rate of tax. At present they can claim up to 45%. The changes will be phased in from April 2017.
A 3% Stamp Duty premium will also come into effect on second homes and buy-to-let properties from April, announced by George Osborne in the Autumn Statement.
Mark Harris, chief executive of SPF Private Clients, said he expects to see a flurry of activity in the coming weeks from investors keen to take advantage of low buy-to-let rates.
“However, lenders are imposing tighter criteria on buy-to-let mortgages when it comes to stress testing, and others are expected to follow, making it harder to qualify for higher loan-to-value mortgages, particularly in the south where yields are low,” he added.
John Eastgate, sales and marketing director of One SavingsBank, said: “Investor demand may balance out after the April rush, but the Help to Buy ISA will help underpin long-term first-time buyer demand, and the diminishing prospect of an interest rate rise will help keep a lid on monthly mortgage payments. As UK employment hits a record high, all this bodes well for borrowers’ finances and the health of the market,” he added.
Jeremy Duncombe, director of Legal & General Mortgage Club, said the number of transactions had remained flat throughout the year as a result of a lack of available housing stock for buyers.
“This is contrary to the increases we are seeing in lending, showing that this strong performance is being driven in part by escalating house prices as people are having to take out larger loans to secure a property,” he said.
He added more houses need to be built to create a more fluid and affordable housing market for prospective buyers.