Mortgage market remains resilient in June

The latest data and analysis from UK Finance has revealed that first-time buyers borrowed £5.9bn, up 26% on the previous month and 9% on June 2016. This equated to 36,000 loans, up 22% month-on-month and 6% year-on-year.

Related topics:  Finance
Warren Lewis
15th August 2017
house stats
"First time buyers are having a field day..."

According to the data, home movers borrowed £7.8bn, up 26% on May and 15% year-on-year. This equated to 36,500 loans, up 24% month-on-month and 9% compared to a year ago. Home-owner remortgage activity totalled £6bn, up 5% by value on May and 7% on a year ago. The number of remortgage loans totalled 34,300, up 5% month-on-month and 6% on a year ago.

Gross buy-to-let totalled £3.0bn, up 3% on May and up 3% compared to June 2016. These equated to 19,700 loans, up 3% month-on-month and 6% year-on-year.

On a non-seasonally adjusted basis, UK Finance shows that mortgage lending in the second quarter also rose:

Home buyers borrowed £34.4bn, up 18% on Q1 and 24% on Q2 2016. This equated to 183,300 loans, up 16% on Q1 and 9% on Q2 2016. Within this, first-time buyers borrowed £14.8bn, up 18% on last quarter and 10% on Q2 2016. They took out 91,400 loans, up 15% quarter-on-quarter and 6% year-on-year.

Home movers borrowed £19.6bn, up 19% on Q1 and 21% year-on-year. This equated to 92,200 loans, up 17% quarter-on-quarter and 13% compared to a year ago. Home-owner remortgage activity totalled £16.9bn, down 11% by value on Q1 but up 1% on a year ago. The number of remortgage loans totalled 96,900, down 12% quarter-on-quarter and 1% on a year ago.

Gross buy-to-let totalled £8.4bn, down 6% on Q1 but up 5% on Q2 2016. This equated to 55,400 loans, down 6% on the previous quarter but up 5% year-on-year.

Paul Smee, Head of Mortgages at UK Finance, commented: “June's figures show a busy month in the mortgage market, with home movers having their highest monthly activity levels for over a year and an especially high number of loans for first-time buyers. Buy-to-let activity remains subdued compared to its 2015 peak but consistent month-to-month since stamp duty changes in April 2016.
 
But there are also signs of a softening market and we are not anticipating that this performance will be sustained in the second half of 2017. A slightly lop-sided market could well show some growth in house purchase lending but alongside reduced remortgage and buy-to-let activity."

Home-owner house purchase and remortgage lending in June

On a seasonally adjusted basis, lending to first-time buyers and home movers remained relatively unchanged month-on-month, but there were year-on-year increases by volume and by value. Buy-to-let and remortgage activity remained relatively unchanged in June from May.

The proportion of household income used to service capital and interest rates continued to be near historic lows in June for both first-time buyers and home movers at 17.3% and 17.5% respectively.

Affordability metrics for first-time buyers saw the typical loan size increase from £137,000 in May to £139,000 in June. The average household income increased to £41,000 from £40,500. This meant the income multiple went up from 3.58 to 3.59.

The average amount borrowed by home movers in the UK increased to £180,000 from £177,000 the previous month, while the average home mover household income increased month-on-month from £54,900 to £55,200. The income multiple for the average home mover went up to 3.39 from 3.37.

Buy-to-let lending in June

Buy-to-let activity was driven by remortgage lending which accounted for over two thirds of total lending. Buy-to-let house purchase and remortgage activity in June remained consistent with monthly levels seen since the change on stamp duty on second properties introduced in April last year.

Jeremy Leaf, north London estate agent and former RICS residential chairman, says: "These figures are interesting because they don’t actually say very much. They show a fairly stable market at a time when we might have expected more nervousness among buyers and sellers. What we are seeing on the ground is a determination to get on with property transactions even if that means negotiating harder to make sure they go through.

Looking forward we don’t expect to see any significant changes but it is a good time to do business when expectations are relatively flat and the market is left to more serious buyers and sellers.

The fact that inflation has fallen from 2.9 to 2.6 per cent and is staying there is good news for the housing market as expenditure won’t feel any more squeezed than it has done over the past few months and may even persuade some to take the plunge.’

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: "Mortgage rates are still exceptionally low, and continue to support property prices to a degree. With an interest rate rise seemingly not imminent, it looks as though those rates will stay low for now. However, average remortgage pricing has started edging upwards in the past few weeks so those holding off in the hope of an even cheaper deal may be disappointed if they delay much longer."

Liz Syms, Connect for Intermediaries managing director, says: “If the intention of the additional stamp duty on buy-to-let was to slow the amount of purchases by landlords and increase the number of first time buyers then based on today’s UK Finance figures you would have to say that it is working. First time buyers borrowed 26% more in June compared to May while buy-to-let lending rose only 3% in comparison with the majority of buy-to-let lending being remortgages.

There may well be a small surge in purchases by portfolio landlords in September ahead of the new rules that will make it tougher for them to borrow after the 1st October, then I expect to see a slight dip again as the new regulations bite - until people get used to them and they become the new normal.

There are still opportunities for landlords however and the need both for a better return on investment as well as the need for private rental property will mean that the buy-to-let market will not disappear.”

Graham Davidson, managing director of buy to let specialist, Sequre Property Investment, comments: “Despite an expected seasonal dip for house prices as we lead into the summer months, the figures reflect a wholly resilient market in England with average prices increasing by 5.2% over the year.  Fierce competition for property in key northern cities such as Manchester and Liverpool will have no doubt played a part in the 5.5% yearly increase in north west property prices which is great news for those seeking capital growth in areas already performing well in terms of yields.

While we’re not experiencing any buy to let slowdown in the North West, investor activity in the south continues to weaken due to high property prices and low rental yields. With London’s annual growth at just 2.9% and over 50% of southern investors turning their attention to northern property, the London bubble continues to diminish.”

Russell Quirk, founder and CEO of eMoov.co.uk, commented: "It may seem a long time ago now, but many believe the market is still shaking off a degree of Brexit uncertainty, a stance that has been bolstered by the less than convincing political landscape that followed.

Ironically it has been those that prophesied the rapture of the UK market that have actually been the most detrimental to it. Those closest to the action such as George Osborne and his outlandish claims of an inevitable 18% crash in house prices have seen an air of uncertainty slow the market, albeit a tiny blip on an otherwise impeccable current medical record for UK property.

A year on and in contrast to gloomy predictions, an anticipative Schadenfreude even, we see that, in fact, house prices are nearly 5% higher annually with the monthly decline in growth reversing and the market remaining one of the most robust in the world.

The attempt by Osborne, Hammond and many others to talk the puff out of the UK economy and its related housing market, were grossly exaggerated and in fact completely wrong.”

Richard Pike, Phoebus Software sales and marketing director, says: “It appears that the government plans to get more first-time-buyers onto the property ladder are starting to bear fruit.  Activity in this area of the market reached its highest level since November 2006, with 36,000 purchases in the month.  However, where there are winners there are also losers and the buy-to-let market continues to suffer from the same government intervention.  Nonetheless, it is encouraging, given the recent political upheaval, to see people moving again.

There is plenty of talk about the government’s plans to ‘fix’ the broken housing market and perhaps we are starting to see a shift. The one thing that does seem to be happening is a halt in excessive house price rises, which must be a good thing for long term affordability.”

Alastair McKee, Managing Director of One 77 Mortgages, said: "First time buyers are having a field day.
 
With house prices under pressure, interest rates at record lows and many landlords still licking their wounds, first time buyers see the current market as a window of opportunity. The Help to Buy initiative is the icing on the cake, making that first step onto the property ladder for anyone buying a new build even less daunting financially.
 
June is typically a fairly busy month before the summer lull kicks in but this strong data reflects how the property market still has life in it. With ongoing economic and political uncertainty, the property market is down, but it is by no means out.
 
The latest Government house price data published on Tuesday showed a market that is sideways moving rather than in terminal decline. The major threats to the property and mortgage markets remain the possibility of an interest rate rise, low wage growth and high inflation, which came in once again at 2.6%.
 
It's no surprise many households are locking into fixed rather than variable rates to protect themselves and keep their repayments stable and low."

Jonathan Hopper, managing director of Garrington Property Finders, comments: “After the previous month’s data showed a decline in London’s house prices, it’s concerning but not surprising to see a further - and more pronounced - fall in the capital’s prices in June.

For years, London’s property market seemed to know no bounds, but for two consecutive months the capital has seen a deceleration in prices, forcing sellers to adjust their pricing in keeping with a new reality. There is a degree of inevitability about prices cooling, as house price inflation in the capital raced ahead of wage inflation for several years, but ultimately this situation was always going to be unsustainable.

Across the country as a whole, house prices remained largely flat, although a few regions outside of London also experienced a slowdown in property price growth. Although the ongoing lack of supply has continued to prop up prices, in practice there are many buyers closely watching these movements in the market and managing to secure weighty discounts.

Sellers who are conscious of this and are both pragmatic and flexible in their approach to pricing are most likely to guarantee a sale in today's market."

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