House purchase lending in the UK in November saw a decrease month-on-month by volume and by value of mortgages advanced, but compared to November 2014 volumes and amount borrowed overall increased.
As previously reported, UK gross lending overall in November totalled £20.5bn, down 6% on October but up year-on-year by 27% compared to November 2014. This was the highest lending level in the month of November since 2007.
First-time buyer lending declined by volume and by value compared to October, but saw a year-on-year increase in loan numbers and amount borrowed. Competitive mortgage rates mean first-time buyers continue to pay low levels of their monthly household income to service the capital and interest rate payments of their mortgage at 18.3% in November, joint lowest average percentage level since we began tracking this in 2005 alongside June and September 2015.
Home movers borrowed £6.5bn in November, this was down compared to October but was the highest November-level since 2007. Home movers spent 18.2% of their monthly gross household income to pay capital and interest repayments, unchanged on October but a decrease compared to November 2014.
Remortgage activity saw a decrease by volume and by value in November compared to October, but increased year-on-year to have the highest volume of remortgage loans in the month of November since 2011 and the most borrowed in the month of November since 2008.
Lending for buy-to-let
Gross buy-to-let lending decreased in November compared to October but was substantially up on last year. Buy-to-let remortgage continues to be the driver of activity remaining consistent with October and considerable up on the year before.
Paul Smee, director general of the CML, commented: “As expected, mortgage lending activity eased back as the normal dip in the winter months began. There was still growth across all lending types in November compared to the year earlier suggesting continued improvement. Our forecasts anticipate that gross lending will continue a slow but steady upward trajectory over the next two years.”
Richard Sexton, director of chartered surveyor e.surv comments: “Despite an expected seasonal dip in lending, it’s clear that lasting progress has been made over the previous year. A slight fall in November is no cause for concern – a cooler climate almost always come hand in hand with a cooler housing market. The difference that sets this year apart from the last is that confidence has significantly returned and lenders are keen to support credit-worthy borrowers including FTBs. Despite the triplet of tests ahead for the lending market – interest rate rises, political scrutiny and a shortage of available properties – lending has shown a hardy resilience and strength.
For first-time buyers, prospects are certainly looking brighter than they did twelve months ago. Always a telling indication of the health of the lending market, an annual increase is greatly encouraging. There is now a supportive environment which is really aiding first-timers get their first foot on the property ladder.”
Patrick Bamford, Director – Mortgage Insurance Europe for Genworth, comments: “The competitive mortgage rates we’ve witnessed over the last year means that payments as a percentage of income remain at a record low for first-time buyers.* However, this is of little relief to the vast numbers of hopeful buyers who are unable save the amount required for a deposit to take that first step onto the property ladder.
First time buyer numbers were already on the wane in November, a concerning result when you consider that there are no shortage of government schemes to support first time buyers, with Starter Homes and the Help to Buy ISA in the process of launching.
The end of the Help to Buy mortgage guarantee is fast approaching and with little sign of Treasury appetite to continue this support, lenders will need to take steps to ensure that high loan to value (LTV) lending does not fall back into decline.”
Stuart Law, CEO at Assetz for Investors, said: “Buy-to-let lending saw a significant annual leap in November 2015 of almost 35%, reflecting the continued confidence and demand among investors for UK property as an investment vehicle. The increase could be attributable to the recent relaxation in pensions which now allow retirees to withdraw lump sums for other uses or could be as a result of general post-election confidence. This surge will continue to be present in the data over the next few months as we see a wave of prospective investors looking to make their move before the new stamp duty policy penalising second homes comes into force in April 2016. Thereafter however, we will likely see the figures decline as the new taxes on buy-to-let start to deter investors a little.
Today’s data also tells a positive story for first-time buyers, a demographic which has also seen a significant annual uplift in mortgage lending. The phase before April 2016, in which a high number of buy-to-let investors will seek to enter the market before the new stamp duty rules come in, could be a tricky period for first-time buyers who will see heightened competition for similar properties. However, this ought to ease after April. In the long term the government needs to take drastic action to address the shortage of homes in the UK. By doing so first-time buyers and buy-to-let investors will be able to exist harmoniously as part of a strong property market with healthy property price growth right across the country.”
Andy Knee, chief executive of LMS, had this to say: “The closing months of 2015 wrap up with a slight drop in remortgage activity after a thriving summer and autumn*. Yet overall the value of transactions increased by more than a third quarter (36%) year-on-year offering positive signals for the year ahead in the remortgage market.
However, the market should not become complacent and there is still a long way to go before reaching the amounts seen in the pre-recession years. External factors will also inject a note of caution to the industry’s projections for the coming year. Significant changes to the buy-to-let market, a fluctuating stock exchange and increased debate around a UK housing bubble may all take their toll on the property market.
Despite this, the economic climate remains rampant for remortagaging. Lending rates remain low – although they have risen slightly in recent months – and lender appetite is high. Although there are low expectations of a base rate rise occurring before the end of this year, and more likely in 2017, homeowners should look to fix now to save hundreds of pounds in interest repayments, something many families will be relieved to discover after splurging at Christmas.”
