Home buying was on the decline in January, while remortgage activity surged ahead, rising by 54% month-on-month, according to new figures.
New data from the Council of Mortgage Lenders (CML) reveals that, on a non-seasonally adjusted basis, home buyers borrowed £8.4bn in January. This was 28% lower than December’s figures and unchanged from January 2016.
The volume of loans in January (45,700) was also down, by 28% on December and 1% on January 2016.
First-time buyer borrowing was down 29% month-on-month at £3.6bn, but up 9% on January 2016. This represented 22,600 loans, down 29% month-on-month but up 7% year-on-year.
Home movers borrowed £4.9bn in January, a fall of 25% on December and 4% on January 2016. In total, home movers took out 23,000 loans, down 27% month-on-month and 7% year-on-year.
Remortgage activity, however, remained buoyant rising 54% by value and 46% by volume when compared to December 2016. Against January 2016’s figures, remortgage lending was up 22% by value and 21% by volume.
As for buy to let, CML data reveals that gross lending was up 11% by value and 12% by volume, on a monthly basis. However, decreases were seen in the number and value of loans as both figures were down by 16% on January 2016.
Put into the context of recent events, the CML noted that the number of loans advanced for buy-to-let was the second highest monthly level since the change to stamp duty on second properties was introduced in April 2016, behind November 2016.
Buy to let remortgage lending was mainly responsible for this, accounting for over two thirds of total lending, as compared to the number of loans advanced for buy-to-let house purchase in January, which was at an eight-month low. The CML said, this was in part due to the traditional seasonal dip in activity in the winter months.
Buy to let remortgage lending was at its highest monthly level, alongside November last year, since the stamp duty reform was introduced.
On a seasonally adjusted basis, the CML reported that the monthly change in first-time buyer and home mover activity was minimal, with first-time buyer lending increasing by 2% by value but declining by 2% by volume. However, there was growth by volume and by value on a yearly basis.
For home movers, the number of loans stayed the same month-on-month, while the total value increased by 3%. Year-on-year home mover activity fell slightly by value and volume.
Paul Smee, director general of the CML, said:
“January gives the impression of a flattish market overall, albeit one with a resurgent remortgage sector. We expect a seasonal dip in activity in the winter months and this appears to be the case in January. However, the lull in moving activity appears stubbornly persistent, and we have commissioned research on the reasons why the number of transactions seems in secular decline.
“Buy-to-let house purchase activity continues to be weak, despite strong buy-to-let remortgage levels. This will likely remain so going forward as lenders tighten affordability criteria ahead of the PRA mandated stress tests, and the introduction of tax changes in April.”
David Whittaker, CEO of Mortgages for Business added,
“The buy to let market is fortunate to be underpinned by high demand for privately rented accommodation, despite obstacles aimed at curbing its growth. It was encouraging to see that buy to let lending increased on December 2016 back in line with the level recorded in November 2016.
Remortgaging continues to drive activity as landlords take advantage of all-time low rates. As expected, lending for purchases lags behind and it will take a while for landlords to adjust to the new environment of increased stamp duty, tougher stress tests and the imminent curtailment of tax relief.
This year, buy to let lending overall is likely to be more muted than in 2016 but it still remains a viable proposition, particularly for landlords who treat property investment as a business rather than an alternative pension plan.”
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