Lending figures for May indicate that the market may have stablised, following the stamp duty spike in March, and that for the second month in a row first-time buyers borrowed more than home movers.
The latest figures from the Council of Mortgage Lenders (CML) reveal that house purchase mortgage lending was up 8% year-on-year in May.
Home-owners borrowed £9.4bn for house purchase, an increase of 15% on April. And altogether they took out 53,800 loans, up 13% on April and 5% on May 2015.
Lending to first-time buyers was up 23% year-on-year. They borrowed £4.3bn, an increase of 10% on April, totalling 27,500 loans (up 9% month-on-month and 16% year-on-year).
Meanwhile, home movers borrowed £5.1bn worth in loans, a rise of 19% on April but down 2% on May 2015. This equated to 26,300 loans, up 18% month-on-month, but down 5% year-on-year.
Remortgage activity in May fell 15% compared to the month before, but was up by 30% on May 2015. A total of 5.2bn was taken out by home-owners, representing 30,900 loans: again down on last month by 12%, but up 25% compared to a year ago.
As predicted, lending to Landlords was down on last year’s figures, following the introduction of the Stamp Duty surcharge for second homes in April. In total landlords borrowed £2.6bn, a fall of 4% on May 2015, but up by 4% month-on-month.
This came to 16,600 loans overall, up 3% compared to April but down 8% year-on-year.
Paul Smee, director general of the CML, said:
“There was a sense of the market regaining some equilibrium in May, following the stamp duty driven spike in March and the subsequent dip in April. For the second month running, first-time buyers borrowed more than home movers, the first time in 20 years that this has been the case. Buy-to-let continues at lower levels as expected, after the change to stamp duty.
“Brexit, and its likely effect on the market, is a question to which the answer will not immediately be forthcoming. Lenders will continue to be open for business as usual, but lending volumes may be affected by uncertain consumer sentiment.”
David Whittaker, Managing Director of Mortgages for Business commented:
“By volume, mortgages to finance buy to let purchases are down 50% on April and May last year. By contrast, remortgaging of buy to let property is up 25% as savvy landlords continue to take advantage of low rates.
“In March the industry processed three months’ worth of business because of the rush to beat the stamp duty surcharge. Now we have the leave vote to unsteady the waters, so we may have to wait until September’s figures are released in November before we can really begin to assess the impact of all the tax changes and Brexit on the buy to let mortgage sector.
At a guess I think we can expect the market to remain less vibrant until both the political and economic direction of travel for the country as a whole is more clearly defined. That said, in a post-Brexit world, people will still need homes and renting will remain in sharp demand. Property investors’ long-term prospects remain positive.”
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13th July 2016