Bob Pannell, chief economist of the CML, commented: “Seasonal factors pushed all categories of lending lower in August compared to July. However, the mortgage market continues to see year-on-year growth, and we expect this to continue over the coming months."
House purchase lending in the UK saw a month-on-month decline by volume and by value for the first time since April this year. However, this was the third consecutive month that lending for house purchase increased year-on-year by volume and by value. This was the highest house purchase lending activity level for the month of August since August 2007. However, volume levels this month were still only 60% of what they were in August 2007.
As previously reported, UK gross lending in August totalled £19.7bn, down 9% on July but up 10.7% on August last year.
Overall in August, home-owner loans for house purchase accounted for 57% of gross lending (57% in July), while remortgage activity accounted for 21% (24% in July). Home-owner loans as a share of gross lending have increased since the new year while remortgage activity has edged down. Buy-to-let lending as a proportion of total gross lending remained at 17%, a consistent level since the beginning of the year, but up from 13% in the same period last year.
First-time buyers accounted for 44% of total house purchase lending volumes, a much higher proportion than pre-crisis levels of 30% of the number of loans for house purchase.
This was the highest monthly first-time buyer lending level by volume and by value in the month of August since 2007, but the number of loans was only 78% of the August 2007 levels. The proportion of first-time buyer gross household monthly income in August to service capital and interest payments stayed the same month-on-month at 18.5%, but remained considerably lower than 19.7% in August last year, and much lower than the most recent high of 24.8% in December 2007.
Lending for buy-to-let
Buy-to-let lending for house purchase has showed stronger year-on-year growth than home-owner loans for house purchase for most of the year, which in part is a market recovery response as buy-to-let lending declined more than home-owner lending during the downturn. While loans to home-owners for house purchase declined by 50% in volume terms from 2007 to 2009, BTL loans for house purchase declined 71% in the same period. Buy-to-let continues to represent 17% of gross lending in August, a proportion that has remained relatively consistent since the beginning of the year.
Overall, buy-to-let lending decreased in August compared to July, but saw substantial year-on-year increases by volume and value compared to August 2014.
Andrew Turner, Director, Commercial Trust Ltd says “Buy-to-let remortgage and purchase activity saw significant growth year on year. Recently, landlords have been seeking ways to cancel out the loss in tax relief; many have been fixing their rates longer where possible, and we’ll likely continue to see an increase in buy-to-let remortgages.
The 13 per cent dip in buy-to-let purchases, however, could be a seasonal effect as reported by CML – or purchasers could just be holding back to see how the months after the budget announcement play out and whether it could potentially have a long-term effect. I am certain that, with strong demand from tenants and favourable interest rates, the buy-to-let sector will continue to grow despite these setbacks.”
Richard Sexton, director of e.surv chartered surveyors, comments: “Summer shouldn’t be read as a setback. Mortgage lending is remains strong – despite a seasonal dip in August.
In terms of house purchase approvals, we’re seeing lending going from strength to strength. Since these figures for August, volumes have shown steady progress into September and October. There’s particularly good news for first time buyers. Smaller deposit lending is the most buoyant area in the pipeline, and this tallies with today’s encouraging picture from the CML for those joining the bottom of the ladder.
Meanwhile with deflation the reality once more, the chances of higher interest rates are receding again. There’s a long way to go until real optimism in the housing market compares to the pre-crisis atmosphere – but for the immediate future the weather seems set fair.”
