Lending to first-time buyers increases by 25pc in June

Written by Jeni Browne

New figures reveal continuing growth in house purchase activity overall, with first-time buyer lending rising by 25% in June compared to a year ago, equating to 34,300 loans.

According to the latest figures from the Council of Mortgage Lenders (CML), first-time buyers borrowed £5.5bn in June, a rise of 28% compared to May and up 25% on June last year. They took out 34,300 loans, up 24% month-on-month and 17% year-on-year.

Quarterly figures also show an increase of 23% in first-time buyer lending compared to the first-quarter of this year and an increase of 21% on the same quarter last year. This equated to 87,100 loans, up 23% month-on-month and 14% year-on-year.

Home-owner lending figures were up 12% year on year and 29% month on month, with home-owners borrowing £12.3bn for house purchases. They took out 68,200 loans, which was up 26% on May and 8% on June 2015.

On a quarterly basis, however, home-owner lending was recorded as being £30bn, down 2% quarter-on-quarter and 7% year-on-year. In the second quarter of 2016, home owners took out 168,600 loans, up 4% on the first quarter and 3% in the same quarter in 2015.

Home movers borrowed £6.9bn – up 33% on May and 5% compared to a year ago. This equated to 33,900 loans, up 28% month-month and 0.3% on June 2015.

Quarterly activity reveals a decline in home mover lending, with movers borrowing £16.4bn, down 16% on the first quarter and 2% compared to June 2015. They took out 82,600 loans, falling 10% quarter-on-quarter and 6% one the second quarter of 2015.

June’s remortgage activity was up-beat: lending figures were recorded at £5.6bn, up 8% on May and 6% compared to a year ago. This represented 32.400 loans, a 4% month-on-month rise, but down 2% on last year.

Quarterly remortgage figures point to a 10% rise on the first quarter of this year and a 25% rise compared to a year ago, with lending figures totaling £16.9bn. This came to 98,700 loans, up 10% quarter-on-quarter and 17% compared to a year ago.

Lastly, and as expected, buy to let figures in June were up 12% month-on-month but down 15% year-on-year, as landlords borrowed £2.9bn. This figure represents 18,300 loans in total, up 8% compared to May and 17% compared to June 2015.

Unsurprisingly, following the introduction of the Stamp Duty Surcharge, buy to let lending was down 46% compared to the first quarter of the year and down 9% year-on-year, as landlords borrowed £8bn in the second quarter of 2016. 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, said:

“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 any time 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.”

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

“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, the 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. “

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