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Home purchase lending falls in July

The latest figures from CML reveal that July’s house purchase lending was down 13% on June’s figures and 12% year-on-year.

The Council of Mortgage Lenders (CML) has released its latest lending figures, which cover the first full month of lending following the EU Referendum.

On an unadjusted basis home-owners borrowed £10.6bn for house purchases, which was 13% down month-on-month and 12% down year-on-year. This equated to 58,100 loans, down 14% on June and 13% on July 2015.

First-time buyers also borrowed less. They took out £4.4bn worth of loans, down 19% on June and 4% on July last year. This totaled 28,200 loans, a drop of 17% month-on-month and 6% year-on-year. However, affordability metrics for first-time buyers remained relatively stable and the typical loan size decreased from £135,700 in June to £133,000 in July.

With regards to home movers, they borrowed £6.2bn, down 9% on June and 16% compared to a year ago. They took out 29,900 loans, which was down 11% month-on-month and 19% on July last year.

Remortgage activity, however, was up 7% on June and 20% year-on-year, totaling £6bn, which, alongside April 2016, is the highest monthly amount borrowed for remortgage since January 2009. In total 33,400 loans were advanced, up 3% month-on-month and 10% compared to a year ago.

Lastly, landlords borrowed £3bn, a 3% increase month-on-month but a fall of 21% compared to last year. A total of 18,600 loans were approved, up 1% compared to June but down 26% year-on-year. Buy-to-let remortgage lending continues to be the driver in this sector, making up two-thirds of gross lending.

Paul Smee, director general of the CML, said:

“These figures cover the first full month of lending following the EU referendum. They show a month-on-month decline in first-time buyer and home mover activity and muted activity on the buy to let market.

“It is hard to determine whether these figures reflect a first uncertain reaction to the referendum vote, or are a sign of a market which was already cooling. It will be quite some time before a full assessment can be made. We do believe that the Buy-to-let lending market is still readjusting after the large level of activity before the changes to stamp duty on second properties in April.

“Remortgage lending on the other hand has continued to grow, and reacted with a seven-year monthly high. Borrowers seem keen to take advantage of the wide range of competitive deals in the market and, following the base rate cut in August, this is likely to continue.”

David Whittaker, CEO of Mortgages for Business added:

“It is too early to say whether July’s fall in lending is due to the EU referendum at the end of June. While there can be little doubt as to the magnitude of result, the reality is, there are too many other factors affecting the wider economy to pin it all on Brexit.”

“While total mortgage lending fell between June and July, remortgaging and buy to let lending increased. Landlords are continuing to return to the market as they become more familiar with the changing tax environment and have factored this into their financial planning. Continued low mortgage rates have also spurred them on, and the recent cut in Bank Rate, will no doubt encourage them further not only to remortgage but also to expand their portfolios.

“We are seeing an increase in the number of landlords using corporate vehicles in order to invest in the property market, and we expect further increases as more investors seek to maximise their returns in the wake of tax relief restrictions on personal borrowing. There are still strong returns to be had in the property market for intelligent investors – especially compared to equities, bonds and savings, which have performed poorly since the referendum.”

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