"For the second month running, first-time buyers borrowed more than home movers, the first time in 20 years that this has been the case."
The data also revealed that first-time buyers borrowed £4.3bn, up 10% on April and 23% on May last year. This equated to 27,500 loans, up 9% month-on-month and 16% year-on-year. Home movers borrowed £5.1bn, up 19% on April but down 2% compared to a year ago. This represented 26,300 loans, up 18% month-on-month but down 5% on May 2015.
Remortgage activity totalled £5.2bn, down 15% on April but up 30% compared to a year ago. This came to 30,900 loans, down 12% month-on-month but up 25% compared to a year ago.
Landlords borrowed £2.6bn, up 4% month-on-month but down 4% year-on-year. This came to 16,600 loans in total, up 3% compared to April but down 8% compared to May 2015.
Home-owner house purchase lending in May
Affordability metrics for first-time buyers have remained relatively stable. The typical loan size increased to £131,000 from £130,000 in April, while the household income of borrowers also increasing slightly from £39,700 in April to £40,000 in May, which meant the income multiple went up from 3.46 to 3.51.
Home movers showed a similar trend with the average amount borrowed increasing to £166,000 from £163,000 in April, and the average household income of a home mover also increasing to £53,300 from £52,500. This meant the income multiple went down from 3.26 to 3.25 month-on-month.
Remortgage lending saw a month-on-month decrease in May but a year-on-year increase by both volume and value, reaching levels similar to those in the first three months of the year.
Buy-to-let lending in May
Gross buy-to-let lending continues to be lower than usual as expected after the surge in activity to beat the stamp duty changes on second properties ahead of the April 1 deadline. Buy-to-let house purchase lending is under half what it was in the months leading up to the stamp duty changes, whereas buy-to-let remortgage is by value 10% lower than levels seen in January and February before the surge in activity in March.
Paul Smee, director general of the CML, had this to say: “There was a sense of the market regaining some equilibrium in May, following the stamp duty driven spike in March and the subsequent dip in April. For the second month running, first-time buyers borrowed more than home movers, the first time in 20 years that this has been the case. Buy-to-let continues at lower levels as expected, after the change to stamp duty.
Brexit, and its likely effect on the market, is a question to which the answer will not immediately be forthcoming. Lenders will continue to be open for business as usual, but lending volumes may be affected by uncertain consumer sentiment.”
Andy Knee, Chief Executive of LMS, said: “The mortgage market in May appeared confident, with the value of borrowing up year-on-year for home-owners, first-time buyers and remortgagors.* Just buy-to-let lending was down when compared to May 2015, hampered by the change to Stamp Duty.
The surprise result in the UK vote to leave the EU does mean a certain volatility in the housing market will ensue in the coming months and it is not yet clear exactly how this will play out, but we’re seeing little evidence anecdotally of purchases or transactions falling through.
The Bank of England looks likely to lower the base rate to a new historic low of 0.25%, which could ensure competitive mortgage rates continue to be offered, presenting an opportunity for existing homeowners to remortgage and reduce their outgoings. However, this is not all good news as lender appetite for risk will be lower in the current economic climate, which could hamper chances for some first-time buyers.”
