"First-time buyers are continuing to drive house purchase lending, outperforming home movers for the third month running"
According to the report, home movers borrowed £6.9bn, up 33% on May and up 5% compared to a year ago. This represented 33,900 loans, up 28% month-on-month and up 0.3% on June 2015. Remortgage activity totalled £5.6bn, up 8% on May and 6% compared to a year ago. This came to 32,400 loans, up 4% month-on-month but down 2% compared to a year ago.
Although landlords borrowed £2.9bn, with borrowing up 12% month-on-month, compared to the same period last year it was down 15%. This came to 18,300 loans in total, up 8% compared to May and 17% compared to June 2015.
On an unadjusted basis, in second quarter:
Home-owners borrowed £30bn for house purchase, down 2% quarter-on-quarter and 7% year-on-year. They took out 169,600 loans, up 4% on the first quarter and 3% on the same quarter in 2015. First-time buyers borrowed £13.7bn, up 23% on the first quarter of the year and up 21% on the same quarter in 2015. This equated to 87,100 loans, up 23% month-on-month and 14% year-on-year.
Home movers borrowed £16.4bn, down 16% on first quarter and 2% compared to a year ago. This represented 82,600 loans, down 10% quarter-on-quarter and 6% on the second quarter 2015.
Remortgage activity totalled £16.9bn, up 10% on the first quarter and 25% compared to a year ago. This came to 98,700 loans, up 10% quarter-on-quarter and 17% compared to a year ago.
Landlords borrowed £8bn, down 46% compared to the first quarter of the year and down 9% year-on-year. This came to 51,600 loans in total, a drop of 45% compared to the first quarter and down 11% year-on-year compared to the second quarter of 2015.
Paul Smee, director general of the CML, commented: “These figures reveal growth in house purchase activity and in particular for first-time buyers. As ever, there is uncertainty and it will take more time and patience to understand how the market will evolve in the current environment – these figures predominantly cover activity in the run-up to the referendum. We still believe that the mortgage market is well capitalised, resilient and open for business, and will remain so for the foreseeable future.
First-time buyers are continuing to drive house purchase lending, outperforming home movers for the third month running. More loans were advanced to them in June than at anytime since August 2007. Buy-to-let house purchase activity remains lower than before the stamp duty changes at the beginning of April, but showed a large month-on-month increase. As might be expected, buy-to-let remortgage seems to have been less affected by the changes and remains consistent with lending last year.”
Home-owner house purchase lending in June
Affordability metrics for first-time buyers have remained relatively stable. The typical loan size increased to £135,400 from £131,400 in May, while the household income of borrowers also increasing slightly from £40,000 in May to £40,377 in June, which meant the income multiple went up from 3.51 to 3.55.
Home movers showed a similar trend with the average amount borrowed increasing to £171,000 from £166,000 in May, and the average household income of a home mover also increasing to £54,700 from £53,300. This meant the income multiple went down from 3.25 to 3.26 month-on-month.
Remortgage lending saw a month-on-month increase in May but a year-on-year decrease by volume.
Buy-to-let lending in May
Gross buy-to-let lending, while lower than levels we saw last year, was the highest monthly levels of activity by volume and by value since the stamp duty changes on second properties came in on April 1. Buy-to-let remortgage continues to be the driver of the market making up two-thirds of gross lending, however, buy-to-let house purchase grew month-on-month substantially whereas buy-to-let remortgage dipped slightly.
Richard Connolly, Chief Executive Officer at Rentplus, comments: “It’s reassuring to see an increase in first-time buyers in June, confirming that more young Britons are realising their dream of homeownership. However, homes unfortunately still remain unaffordable for many, with house prices rising faster than wages during the year. First-time buyers are therefore having to increase their borrowing even further, just to get a foothold on the property ladder. Despite low interest rates and other incentives, homeownership remains out of reach for many; with rents continuing to rise, this further hinders progress on savings for a deposit.
With the changing economic climate after the EU referendum, the challenge of increasing homeownership may now steepen. While low interest rates may make obtaining mortgages more affordable, there could further hurdles such as potential slowdowns in employment or construction making it more difficult to buy a home. To give first-time buyers a boost, the government needs to implement a range of mixed tenure options to help improve access to housing. To do so it’s vital to consider new entrants on to the market such as Rentplus which use private sector, institutional investment to increase delivery and increase the range of affordable homeownership opportunities.”
David Whittaker, Managing Director of Mortgages for Business, had this to say: “June’s data shows that the stamp duty changes may have a softer long-term impact on the buy-to-let impact than many expected. For the second month there was a strong increase in lending to landlords, which saw a sharp decline following the introduction of the new Stamp Duty Land Tax (SDLT) at the end of March. Ultimately, strong market fundamentals and demand for rental accommodation will continue to provide good returns for landlords who take an intelligent approach to investment.
July may be different. For landlords, the biggest piece of news in June – and perhaps this century – was the victory for the Leave vote in the EU referendum. In the long run this will profoundly alter the state of the country’s economy, and it will be interesting to see if July’s data reflects a more conservative approach from property investors. But while macro-economic turbulence is bad news for any market, property should continue to offer investors stability given its positive fundamentals – especially when compared to asset classes like bonds, gilts and equities.
Further ahead, the Bank of England’s decision to lower the base rate this month will also make property investment more attractive, by weakening returns on savings. However, those hoping for a bonanza of cheap mortgage rates may be disappointed, as these are largely dictated by the cost of borrowing on the inter-bank swap markets.”
