Homebuyers benefit from historically low mortgage costs in September

Mortgage affordability dipped to historic lows in September, according to the latest figures from the Council of Mortgage Lenders (CML).

The CML says that the amount home owners are paying as a percentage of their household income to service capital and interest rates reached a historic low in September, both for first-time buyers and home movers, at 17.8% and 17.7% respectively.

On an unadjusted basis in September, home owners borrowed £11.4bn for house purchase. This is down 7% month-on-month, but up 4% year-on-year.

The CML reports that they took out 62,900 loans, which is 5% down on August’s figures but up 3% on September 2015.

Meanwhile, first-time buyers borrowed £4.9bn, a decrease of 4% on August but up 14% on September 2015. First-time buyers took out 31,500 loans, a 1% decrease month-on-month, but a 13% rise year-on-year.

As for home-movers, they borrowed £6.5bn, down 9% on last month and 3% on last year. This came to 31,400, down 8% month-on-month and 5% year-on-year.

Activity in the remortgage market came to £5.5bn, down 7% on August but up 8% compared to last year. This equated to 31,500 loans, down 10% month-on-month but a rise of 2% compared to a year ago.

Lastly, buy to let landlords borrowed £2.8bn, a 7% drop month-on-month and a 22% drop year-on-year. This came to 18,200 loans in total, down 6% compared to August and 24% compared to September 2015.

Quarterly figures have also been released by the CML, showing that home-owners borrowed £34.3bn for house purchase, up 16% quarter-on-quarter and 1% year-on-year. They took out 187,200 loans, up 12% on the second quarter but down 1% on the third quarter 2015.

First-time buyers borrowed £14.5bn in the third quarter, up 8% on the second quarter and 12% on last year. This came to 91,600 loans, up 7% quarter-on-quarter and 8% year-on-year.

Home movers borrowed £19.8bn, up 22% on the last quarter but down 6% compared to a year ago. This represented 95,600 loans, up 17% quarter-on-quarter but down 8% on the same quarter last year.

Remortgage activity totalled £17.5bn, up 5% on the second quarter and 22% on the same quarter a year ago. This came to 100,100 loans, up 3% quarter-on-quarter and 16% compared to a year ago.

Meanwhile, gross buy to let lending was up in the third quarter, with landlords borrowing £8.8bn, a 10% rise quarter-on-quarter but down 19% year-on-year. This came to 56,200 loans in total, up 9% compared to the second quarter but down 21% compared to the third quarter in 2015. Nearly two thirds of buy to let loans were remortgages rather than house purchase.

Although there was a decline in house purchase lending in September compared to a month before, the CML notes that this is the highest volume of loans and most amount borrowed in the month of September since September 2007.

This was mirrored in first-time buyer trends, where the Council recorded the highest volume of loans in the month of September since September 2006.

Paul Smee, director general of the CML, said:

“House purchase activity appears to have steadied, we may not be seeing huge increases in activity on the scale of 2013-14 but there is a consistency in the levels in recent months. Mortgage affordability reached an historic low in September, for both first-time buyer and home movers, which partly reflects the re-pricing of mortgages following August’s base rate cut. This should help turn strong appetite for home-ownership into a reality as we approach the closing months of the year.

“Six months on since the stamp duty changes on second properties and buy-to-let continues to operate at lower levels than a year ago. But lending for buy-to-let house purchase and remortgaging has settles at its current level over the last four months.”


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