House purchase lending for home owners sees huge leap

The latest report from the Council of Mortgage Lenders (CML) has revealed that home-owners borrowed £13.8bn for house purchases, a huge rise of 59% month-on-month and 60% year-on-year. Between them they took out 69,800 loans, a rise of 45% against February and 38% on March 2015.

Related topics:  Finance
Warren Lewis
17th May 2016
house stats

According to the report, those taking their first steps on to the property ladder borrowed £4.5bn, up 32% on February and 29% on March last year. This totalled 28,100 loans, up 28% month-on-month and 17% year-on-year. Home movers borrowed £9.3bn, up 75% on February and 82% compared to a year ago. This totalled 41,700 loans, up 60% month-on-month and 58% on March 2015.

Remortgage activity totalled £4.7bn, down 2% on February but up 7% compared to a year ago. This came to 28,000 loans, down 2% month-on-month but up 0.4% compared to a year ago.

The data also revealed that landlords borrowed £7.1bn, up 87% month-on-month and 163% year-on-year. This came to 45,000 loans in total, up 88% compared to February and up 142% compared to March 2015.

On an unadjusted basis, lending in the first quarter:

Home-owners borrowed £30.9bn for house purchase, down 9% quarter-on-quarter but up 33% year-on-year. They took out 164,200 loans, down 14% on the previous quarter but up 20% compared to the first quarter 2015.

First-time buyers borrowed £11.2bn, down 16% on the fourth quarter 2015 but up 22% on the first quarter last year. This totalled 71,500 loans, down 18% quarter-on-quarter but up 12% year-on-year.

Home movers borrowed £19.7bn, down 4% quarter-on-quarter but up 40% compared to a year ago. This totalled 92,700 loans,  down 9% quarter-on-quarter but up 26% on quarter one 2015.

Remortgage activity totalled £15.4bn, up 2% on the fourth quarter 2015 and 25% compared to a year ago. This came to 90,100 loans, up 1% quarter-on-quarter and 15% compared to a year ago.

Landlords borrowed £14.6bn in the period, up 36% quarter-on-quarter and 92% year-on-year. This came to 92,700 loans in total, up 31% compared to the fourth quarter 2015 and 77% compared to the first quarter 2015.

Paul Smee, director general of the CML, commented: “Activity was distorted in March due to a rush to beat the introduction of changes to stamp duty on second properties in April, alongside the seasonal uptick in activity before Easter. While the increases are substantial, these supercharged levels of activity are likely to be temporary and will fall back over the summer months.”

Home-owner house purchase lending in March

This is the most amount of loans taken out in a monthly period for house purchase since June 2014 and the most amount borrowed for house purchase since August 2007. This was mainly driven by home mover activity with the most amount of loans in a monthly period for home movers since November 2007 and the most amount home movers have borrowed in a monthly period since August 2007. In contrast, first-time buyers while showing growth were only at levels by volume and by value seen in December 2015.

Affordability metrics for first-time buyers have remained relatively stable as even though the amount borrowed increased to £133,000 from £129,000 last month this was offset by the total household income of borrowers increasing from £39,500 in February to £40,549 in March. The amount first-time buyers are spending of their monthly gross income to service capital and interest repayments was 18.0%, which was the lowest level since we began tracking this metric in 2005. Home movers are also paying at record low proportions of income at 17.8%, down from 18.1% in February and March last year, and much lower than the recent peak of 23.8% in December 2007.

Remortgage lending to home-owners saw a decline compared to the previous month but a slight upturn compared to March last year. On a quarterly basis, however, this was the most amount of remortgage loans taken out in a quarter since the fourth quarter 2011 and the most amount borrowed for remortgage in a quarter since the first quarter of 2009.  

Buy-to-let lending in March

Gross buy-to-let lending was at its highest quarterly level by volume since the third quarter of 2007 and the most amount borrowed in a quarter since we began tracking this metric by quarter in the third quarter of 2006. Both buy-to-let house purchase and buy-to-let remortgage saw substantial increases within this period borrowing almost identical amounts."

John Phillips, group operations director of Spicer Haart and Just Mortgages, had this to say: “According to the CML’s latest figures, landlords borrowed £7.1billion which is up 87% month-on-month. It is likely that this surge in activity was caused by the government’s change in stamp duty rates for second properties that came into effect in April, with many approved applications being completed before the deadline.
 
Although the dust has started to settle on this recent change, we are likely to see further distortion in the mortgage market due to the impending EU referendum which will inevitably weigh on sentiment and could affect the economy as a whole. It is of course difficult to gauge exactly what will happen before and after the referendum, but it is widely anticipated that lending will return to more ‘normal’ levels in the coming months.”

Mark Posniak, Managing Director at Dragonfly Property Finance, said: “Lending figures for March may resemble a cricket score but the month was clearly skewed by the stamp duty deadline for buy-to-let and second homes. The increased activity and demand drove up prices more broadly, with London, the East and South East once again leading the field.
 
After the exertions of March, you would expect the market to return to normal but with the EU referendum edging ever closer, normal is by no means guaranteed. We are entering a period of uncertainty for both the property market and the broader economy from which it may take some time to emerge. If there’s one constant in the market at present, it’s the continued lack of supply.
 
This deep structural imbalance should prevent prices from falling materially whether we’re in or out of Europe.”

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