18% rise in lending sees market moving in right direction

The latest data from the Council of Mortgage Lenders (CML) has found that first-time buyer and home mover activity has driven house purchase lending by both volume and by value during Q3.

Related topics:  Finance
Warren Lewis
11th November 2015
house prices up

UK gross lending overall in September totalled £20.1bn, up 3% on August and 13% on September last year. This meant in the third quarter gross lending came to £61.4bn, up 18% on the previous quarter and a 12% rise on the third quarter 2014.  

In Q3, first-time buyers, remortgagors and home movers all saw an increase in the number of loans advanced and amount borrowed both in comparison to quarter two and the third quarter last year.

Competitive mortgage rates mean first-time buyers continue to pay a record low proportion of their monthly household income to service the capital and interest rate payments of their mortgage at 18.3% in September. This is the equal lowest monthly level, with June 2015, since the CML began tracking this metric in 2005.

House purchase lending in the UK in September saw no change by volume of mortgages advanced compared to August, but there was a dip in amount borrowed month-on-month. However, there was an increase in the number of loans for home-owner house purchase compared to September 2014, the fourth month in a row there has been year-on-year increases. The amount borrowed in September also increased year-on-year, the third month in a row this has been the case.

Gross buy-to-let lending increased substantially in September and in the third quarter, up by volume and by value in comparison to the previous time period and the same time last year. This increase in activity was driven by both buy-to-let house purchase (up 36% year-on-year) and buy-to-let remortgage activity, although remortgage levels showed greater growth with a 62% yearly increase.

Overall in the third quarter, the value of home-owner loans for house purchase accounted for 57% of gross lending, while remortgage activity accounted for 24%. Buy-to-let as a proportion of total lending was around 18%.

Brian Murphy, Head of Lending at Mortgage Advice Bureau (MAB), comments: “After a slight lull in August, monthly mortgage lending picked back up in September. Lending is now at similar levels to those seen in June and July, which represented a post-recession high. Remortgage lending had a significant role to play in this growth, with both the volume and value of remortgage loans up substantially month-on-month. In contrast, the value of loans for house purchase saw a slight decline while the volume remained static.

Some mortgage rates climbed in September*, triggering homeowners to lock into competitive rates before they miss out. While the Bank of England recently announced that the low interest rates could be in place for longer than expected, many homeowners still stand to save by moving to a more competitive deal, particularly those who are on their lender’s standard variable rate (SVR).

Buy-to-let (BTL) lending also saw an upwards turn in September, as well as significant annual growth throughout the year. However, this form of lending is rising from a much lower base than the residential market, as availability of BTL mortgages was worst hit by the recent recession. BTL remortgages are slightly outpacing purchase loans in terms of growth, as landlords also see the benefits of moving to a more competitive deal.”

Paul Hunt, Phoebus Software managing director, says: “Now that we have confirmed figures from the CML this morning we have a clear picture of the market in the third quarter and an upward path is evident.  The number of first time buyers making it onto the property ladder is a good sign, but as house prices continue to rise even with the Help-to-Buy scheme this may be something that is short lived if they once again get priced out of the market.

Buy-to-let is again showing good growth, but as has been pointed out, it remains below pre-crisis levels and is fourth on the list of lending types.  It appears that despite the Bank of England making a point of keeping a watchful eye and other industry experts worrying about the rise in buy-to-let this sector still has a way to go before it can really be considered a problem to the overall housing market.”

Paul Smee, director general of the CML, commented: "The market was a slow starter this year, but this quarter shows it is now firmly on an upward trajectory. With competitive rates and high levels of product choice currently available, alongside generally improving economic conditions, we expect this to continue as we head into the new year.

Buy-to-let continues its growth this period, but at 18% of new lending in September remains the fourth largest lending type behind first-time buyers, home movers and remortgage. There were five times as many house purchase loans to home-owners as buy-to-let landlords in September, and the growth in buy-to-let lending largely continues to reflect its more belated recovery from recession."

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: "As we head towards the end of the year, the mortgage market is gathering some real momentum. The number of first-time buyers continue to grow, as they take advantage of the plethora of high loan-to-value deals available. However, a fall in pricing means that first-time buyers are not overstretching themselves as they are paying a record low proportion of their monthly household income to service their mortgages.  

Landlords may be disgruntled by recent tax changes announced in the Summer Budget but they can’t complain about some of the cheapest buy-to-let rates ever. Moreover, there has been some movement on criteria with BMS tiering its stress rates, for example.

Excellent mortgage rates continue to attract home movers and remortgagers, with Precise, TSB and Accord just three of the lenders cutting rates in the past week or so. With Leeds Building Society increasing its maximum LTV on new build by 5 per cent to 90 per cent on houses and 85 per cent on flats, lenders are demonstrating a keenness to lend which is good news for anyone looking for a mortgage over the next few months."

Rishi Passi, CEO, Oblix Capital, added: “Overall, the mortgage market is strong, hitting £20million in September, with Government policy being more of a help than a hindrance in the short term. On the one hand Help to Buy has driven up borrowing by first time buyers both in volume and value – on the other, there is little sign that impending Buy to Let tax restrictions are dissuading landlords from expanding their portfolios.
In September, the number of those re-mortgaging rose, but as we look further into the long term the number pressured into doing so will likely drop, as the prospect of a 2016 interest rate rise disappears from view. Meanwhile cheap money is allowing lenders to offer historically attractive rates to the market and as a consequence lenders are enjoying their best spell since 2008 – enticing first time buyers and developers alike to move and borrow.”

Andrew Turner, director at Commercial Trust, had this to say: “It is positive to learn that during September, gross lending of buy-to-let, buy-to-let house purchasing and buy-to-let mortgaging have all seen strong increases from the same time the previous year, indicating favourable lending conditions across all tenures.

It is clear that buy-to-let is continuing to show real improvement, growing far more quickly than any other type of lending and continuing its trend of being the strongest UK mortgage market in the years since the recession. Though the bulk  of both gross activity and yearly growth was remortgage loans, property purchase loans have also seen a more than modest climb – despite the continuously changing legislative environment in which landlords operate and the threat of increased buy to let regulation, both from pan-European legislation and the Bank of England itself.

If the past few years have shown us anything, it is that buy to let has been the biggest driver of the housing market recovery, and instrumental in servicing the housing needs of the UK. Whilst it is crucial that we do not return to the risky lending conditions seen prior to the recession, it is equally crucial that we do not stifle landlords’ ability to continue to invest and provide homes we desperately need.”

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