The latest data and analysis from UK Finance has shown that remortgaging levels softened slightly after a busy start to the year.
However, the data also revealed that first-time-buyers continued to play their part in the housing market as a small increase in lending to this group occured when compared to a year earlier.
Figures released by Bank of England show that gross mortgage lending in the first quarter of 2018 was £61.1bn, up 3.4% from £59bn in Q1 2017.
UK Finance also found that there was £5.1bn of new lending to first-time buyers in the month, up two per cent year-on-year. 31,200 new first-time buyer mortgages were completed in the month, some 1.9% fewer than in the same month a year earlier. The average first-time buyer is 30 and has a gross household income of £42,000.
There was £6.1bn of new lending to homemovers in the month, 4.7 per cent down year-on-year. There were 28,400 new homemover mortgages completed in the month, some 7.8 per cent fewer than in the same month a year earlier. The average homemover is 39 and has a gross household income of £56,000.
The £5.6bn of remortgaging in the month was 9.7 per cent down year-on-year. There were 32,400 new homeowner remortgages completed in the month, some 12 per cent fewer than in the same month a year earlier.
There were 5,500 new buy-to-let home purchase mortgages completed in the month, some 19.1 per cent fewer than in the same month a year earlier. By value this was £0.8bn of lending in the month, 20 per cent down year-on-year. UK Finance research suggests the recent softening of the buy-to-let market is mostly down to a number of recent tax and regulatory changes including the limiting of landlords’ Mortgage Interest Tax Relief (MITR), the three per cent Stamp Duty Land Tax (SDLT) surcharge and new underwriting requirements introduced by the Prudential Regulatory Authority (PRA).
There were 12,600 new buy-to-let remortgages completed in the month, some 0.8 per cent more than in the same month a year earlier. By value this was £2.0bn of lending in the month, the same year-on-year.
Jackie Bennett, Director of Mortgages at UK Finance, said: “Remortgaging levels softened in March, after a busier than usual start to the year saw customers locking into attractive deals ahead of a potential interest rate rise.
There has been relatively flat growth in lending to first-time buyers, reflecting recent Bank of England figures showing a fall in mortgage approvals. Meanwhile the buy-to-let market remains subdued, as recent tax and regulatory changes continue to have an impact on demand.”
James Cameron, director of property management company Vesper Homes, says: "Many investors, both from the UK and overseas, are holding back from investing in London at present. Property prices are just too high and this, coupled with the stamp duty surcharge for second home purchases, means London is not a viable buy-to-let opportunity, particularly when it comes to new build.
This doesn’t necessarily mean landlords are choosing not to invest at all, however. We have seen a shift in interest from London to cities such as Manchester where there is great value to be had, lower entry points and the ability to get a decent yield, even with the tax changes.'
Mark Harris, chief executive of mortgage broker SPF Private Clients, says: "First-time buyer numbers continue to edge up, which is encouraging, although it is a modest increase. With lenders continuing to offer great rates at high loan-to-values, we would hope to see a continued increase in first-time buyers jumping on the property ladder, which suggests that affordability may still be an issue for many.
Remortgaging softened after a strong start to the year, fuelled partly by expectations that interest rates would rise in May. While the Monetary Policy Committee meeting came and went without a rate rise, there is no room for borrowers to be complacent as it is not necessarily completely off the agenda. With inflation falling and economic growth still weak, that rate rise may not be imminent but borrowers who are worried about paying the mortgage should consider locking into one of the competitive fixes still available."
Mike Scott, chief property analyst at Yopa, says: "First-time buyers are keeping the housing market going, according to March's lending figures. There was only a 1.9 per cent year-on-year fall in the number of first-time buyer mortgages, and an actual increase in the total amount lent to first-time buyers. In contrast, the number of mortgages and and the amount lent to home movers has fallen, with a 7.8 per cent drop in the number of home-mover mortgages.
The first-time buyer market may be helped by mortgage lenders relaxing their lending criteria a little, with a reduction in the average first-time buyer deposit and increase in the average loan-to-value ratio. Nevertheless, mortgages have become slightly more affordable, with reductions in the percentage of income needed for mortgage repayments for both first-time buyers and home movers.
First-time buyers have doubtless also been helped by a very sharp fall in the number of buy-to-let mortgages, down by nearly 20 per cent compared with March 2017 following recent changes in the taxation of buy-to-let properties. This has reduced competition from buy-to-let investors for the types of properties bought by first-time buyers.
Overall, the picture is of a gradually slowing market, with the total number of mortgages for house purchase down by 6.2 per cent, confirming other figures showing a similar reduction in the volume of house purchases."
Richard Pike, Phoebus Software sales and marketing director, says: “When UK Finance released the estimate for March mortgage lending it said there was a rising trend in the mortgage approvals in the first quarter of 2018. The figures have now been confirmed and, in all honesty, even if the levels are lower than this time last year anything that shows upward growth has to be a good thing. Put into perspective, especially with the GDP forecast being downgraded, any small part of the economy that is managing to keep its head above water has to be considered pretty healthy.
We have at least another month at the current bank rate, and more than likely for some months to come, which should see remortgage activity rise again as borrowers feel they have more time to take advantage of low rates.”