In March this year house purchase lending to home-owners leapt by 60% year-on-year and gross buy to let lending was at its highest quarterly level by volume since the third quarter of 2007, new figures from the Council of Mortgage Lenders (CML) reveal.
In March, on an unadjusted basis, home-owners borrowed £13.8bn for house purchase, up 59% month-on-month and 60% year-on-year. In total, they took out 69,800 loans, up 45% on February and 38% on March 2015.
The increase in lending to first-time buyers was less dramatic, with this sector borrowing £4.5bn, up 32% on February and 29% on March last year. This equates to 28,100 loans, up 28% month-on-month and 17% year-on-year.
Home movers borrowed £9.3bn, up 75% on February and 82% compared to a year ago. This totaled 41,700 loans, up 60% month on month and 58% on March 2015.
There was a slight monthly decrease in remortgage activity, totaling £4.7bn, down 2% on February but up 7% compared to a year ago. This came to 28,000 loans, down 2% month on month but up 0.4% compared to a year ago.
Landlords borrowed £7.1bn, up 87% month on month and 163% year-on-year. This came to 45,000 loans in total, up 88% compared to February and up 142% compared to March 2015.
Turning to the unadjusted figures for the first quarter of 2016, home-owners borrowed £30.9bn for house purchase down 9% quarter-on-quarter but up 33% year-on-year. They took out 164,200 loans, down 14% on the previous quarter but up 20% compared to the first quarter 2015.
First-time buyers borrowed £11.2bn, down 16% on the fourth quarter 2015 but up 22% on the first quarter last year. This totaled 71,500 loans, down 18% quarter-on-quarter but up 12% year-on-year.
Home movers borrowed £19.7bn, down 4% quarter-on-quarter but up 40% compared to a year ago. This totaled 92,700 loans, down 9% quarter-on-quarter but up 26% on quarter one 2015.
Remortgage activity totaled £15.4bn, up 2% on the fourth quarter 2015 and 25% compared to a year ago. This came to 90,100 loans, up 1% quarter-on-quarter and 15% compared to a year ago.
Lastly landlords borrowed £14.6bn in the period, up 36% quarter-on-quarter and 92% year-on-year. This came to 92,700 loans in total, up 31% compared to the fourth quarter 2015 and 77% compared to the first quarter 2015.
According to the CML, March’s house-purchase figures show the largest volume of loans taken out in a monthly period since June 2014 and the most amount borrowed for house purchase in almost nine years.
Home mover activity is said to be the main driver behind these figures, accounting for the most amount of loans in a monthly period since November 2007 as well as the greatest amount borrowed by home movers in a monthly period since August 2007.
While first time buyer figures experienced some growth, they were still at the same levels of volume and value seen in December 2015.
There was a slight increase in the amount borrowed by first-time buyers, from £129,000 last month to £133,000, but this was offset by the total household income of borrowers increasing from £39,500 in February to £40,549 in March.
At 18% of their monthly gross income, the amount that first-time buyers spend to pay capital and interest repayments was at its lowest level since 2005.
The proportion of income that home movers are paying is also at a record low, having dropped to 17.8% from 18.1% in February and March last year, and much lower than the recent peak of 23.8% in December 2007.
With regards to remortgage lending to home owners, there was a decline in lending on a monthly basis, compared to a slight year-on-year increase. However, the CML notes that the amount of loans taken out was at its highest level since the fourth quarter of 2011 and the largest amount loaned in a quarter for remortgage since the first quarter of 2009.
Gross buy to let lending was also at its highest quarterly level by volume since 2007 and saw the most amount borrowed in a quarter since the CML began tracking this metric by quarter in 2006.
Both buy to let house purchase and buy to let remortgage experienced significant rises in March, borrowing almost identical amounts; a distortion, the CML explains, that is due to a rush to beat the introduction of changes to stamp duty on second properties in April, alongside the seasonal uptick in activity before Easter.
David Whittaker, managing director, Mortgages for Business, comments:
“March was an electric month for buy to let and the speed at which property investors were completing before the introduction of the stamp duty surcharge propelled borrowing in this sector to practically unheard of growth on both an annual and monthly basis. For many landlords, thousands of pounds were at stake, injecting the market with considerable dynamism. It wasn’t just March which was exceptional – the first quarter as a whole was strong as landlords reacted to Mr Osborne’s changes.
“The dust will begin to settle in this part of the mortgage market through the second quarter of the year. Landlords have a new status quo and it’s not just the additional stamp duty that needs to be factored into their financial planning – investment strategies will also have to take into account upcoming tax relief restrictions plus increased income cover ratios from many lenders.”