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House purchase activity bounces back from dip in July

House purchase lending was up 11% in August compared to a year ago and is showing strong first-time buyer activity, according to the latest industry figures.

New figures from the Council of Mortgage Lenders (CML) indicate that on an unadjusted basis, home-owners borrowed £12.2bn for house purchase in August. This is a 14% rise month-on-month and an 11% rise year-on-year. Overall, home owners took out 66,000 loans, up 13% on July and 9% on August 2015.

First-time buyers borrowed £5.1bn in August 2016, up 13% on July and 24% on August last year. The monthly number of first-time buyers in August was the second highest of 2016, as they took out 31,800 loans, up 12% month-on-month and 19% year-on-year.

Home movers borrowed £7.1bn, an increase of 15% on July and 3% compared to last year. This equated to 34,200 loans, up 14% month-on-month and 1% on August 2015.

Remortgage activity was down 2% on July, totaling £5.9bn, but up 41% compared to August last year. This came to 34,900 loans, up 4% month-on-month and 40% year-on-year.

Lastly, gross buy to let lending remained down on last year’s levels at £3bn, which is a drop of 12% year-on-year, but unchanged month-on-month. This represented 19,400 loans in total, up 4% compared to July but down 13% on August 2015.

Paul Smee, director general of the CML, said:

House purchase activity bounced back from a dip in July, reflecting resilience in first-time buyer activity. Mortgage rates remain at or close to historic lows, and the re-pricing of mortgages following August’s base rate cut should help to underpin a continuing, strong appetite for home-ownership over the coming months."

Buy-to-let by contrast continues to operate at lower levels five months after the stamp duty change on second properties. This appears to be a long-term trend, and with lenders potentially tightening affordability checks ahead of the tax changes in April 2017, activity on the buy-to-let house purchase side may well remain at current levels.”

David Whittaker, managing director, Mortgages for Business, added:

It could be too early to say for sure, but the year-on-year slowdown in buy to let lending could be having George Osborne's desired effect of levelling the playing field for first-time buyers. That's not to say that there aren't still good opportunities for landlords looking to expand their portfolios. We may even see lending for buy to let purchases pick back up before the end of the year, as savvy landlords borrowing personally seek to take advantage of existing income cover ratios ahead of the introduction of the PRA's stricter underwriting rules which come in effect on January 1. What we do know for sure is that buy to let purchases by landlords using limited companies is fast becoming the norm ahead of changes to tax relief and the new PRA guidelines will only push more investors down this route.

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