January sees substantial increase in remortgage lending says CML

Remortgage lending to home-owners in January this year was at its highest since 2009, while year on year figures also showed substantial increases, new data from the Council of Mortgage Lenders (CML) shows.

The CML’s analysis of January’s lending figures, on an unadjusted basis, reveal that home-owner remortgagors borrowed £5.8bn, up 35% on December and 32% compared to a year ago.

This totalled 33,100 loans, up 28% month-on-month and 19% compared to a year ago.

Home-owners borrowed £8.4 for house purchase, down 25% month-on-month but up 12% year-on-year. They took out 46,200 loans, down 27% on December but up 5% on January 2015.

First-time buyers borrowed £3.3bn in January, down 27% on December but up 14% on January last year. This amounted to 21,400 loans, down 28% month-on-month but up 6% year-on-year.

Home-movers borrowed £5.1bn, down 24% on December but up 11% compared to a year ago. This totalled 24,800 loans, down 26% month-on-month but up 3% on January 2015.

Landlords borrowed £3.7bn in January, up 9% month-on-month and 42% year-on-year. This came to 23,100 loans in total, of which 13,400 were for remortgage, up 3% compared to December and up 31% compared to January 2015.

The CML reports that while the number of first-time buyers in January was at its lowest monthly level since February 2015, this is in line with an expected seasonal dip in activity.

Looking beyond seasonal dynamics, despite the fact that lending was flat in January compared to December 2015, affordability was improved.

Average loan sizes and loan to income multiples decreased in January when compared to December and the percentage of income that first-time buyers put towards capital and interest repayments was at its lowest since records began 11 years ago.

The seasonal lull also resulted in the lowest number of house purchase loans taken out by home-movers since February 2015.

The average loan size decreased and the average household income increased month-on-month.

Income multiples, therefore, fell for home-movers and the percentage of monthly household income spent to service capital and interest repayments also decreased.

The number of loans for buy to let house purchases also dropped in January, when compared to December 2015.

However, due to continually strong buy to let remortgage activity, the value of total buy-to-let lending was on the up. Remaining consistent across all sectors, the number of remortgages for buy to let purposes was at the highest monthly level in January since the CML began tracking monthly buy to let lending three years ago.

David Whittaker, Managing Director of Mortgages for Business, commented:

“The buy to let market is continuing to gain steam ahead of 1st April Stamp Duty hike. Given it takes six to eight weeks on average to process a mortgage application, January and early February represented the last chance saloon for those landlords seeking to beat the surcharge. But equally, the strong annual growth in buy to let lending reflects the fact the we are not just seeing a flash-in-the-pan uptick. The sector continues to remain an attractive investment opportunity for those with the patience to wait for steady, long-term returns.

“Looking forward, we expect lending to calm in Q2, once the Stamp Duty change kicks in and the focus turns to restrictions on buy to let finance costs. It is this – rather than the SDLT – which will really change the way the sector operates, as the Government seeks to foster a more business-like tax environment for buy to let.”