Mortgage lending rose for all borrowers, including first time buyers and buy-to-let landlords, in May, shows the latest UK Finance data from the Council of Mortgage Lenders (CML).
Non-seasonally adjusted figures
On a non-seasonally adjusted basis, homebuyers borrowed £10.8 billion in May – up by 10% on April and 16% on an annual basis. This equated to 58,400 loans – up by 12% on the previous month and 10% on May 2016.
Within this, first time buyers borrowed £4.7 billion, which was up by 12% both on a monthly and annual basis. They took out 29,200 loans – up by 13% month-on-month and by 8% on May last year.
Home movers borrowed £6.2 billion – up by 11% on April and 22% year-on-year. This equated to 29,200 loans, which was up by 11% on a monthly basis and 13% compared with the previous year.
Homeowner remortgage activity was up by 10% by value and 9% by volume on April’s figures. Compared to May 2016, remortgage lending rose by 12% by value and 7% by volume.
Gross buy-to-let lending totalled £2.9 billion in May – up by 16% on April and 12% on May last year. This equated to 19,100 loans – a 16% increase on the previous month and 15% on a year ago.
The Head of Mortgages at UK Finance, Paul Smee, comments: “The apparent strong growth in mortgage lending in May might flatter to deceive. The relative weakness in lending last May, following the Stamp Duty changes, makes comparisons misleading. The seasonally adjusted data shows a less buoyant lending picture, with home buying activity remaining relatively unchanged month-on-month and remortgage lending gradually decreasing each month since January.
“In the summer months, we expect home buying activity to continue, with an even split between first time buyers and home movers, but in greater numbers than in the winter months; we expect buy-to-let to remain subdued compared to its recent 2015 peak.”
Seasonally adjusted data
On a seasonally adjusted basis, lending to first time buyers and home movers declined by value and volume in May compared with April, but rose year-on-year.
Buy-to-let and remortgage activity remained relatively unchanged in May on a monthly basis.
The proportion of household income used to service capital and interest rates continued to sit near historic lows in May for both first time buyers and home movers, at 17.3% and 17.5% respectively.
Affordability metrics for first time buyers saw the average loan size increase from £136,000 in April to £137,000 in May. The typical household income dropped, however, from £40,700 to £40,500. This meant that the income multiple went up, from 2.57 to 3.59.
The average amount borrowed by home movers in the UK increased from £176,500 to £177,000 on a monthly basis, while the typical home mover household income fell from £55,200 to £54,900. The income multiple for the average home mover went up, from 3.35 to 3.38.
Last month, the CML released a report into why there is a 400,000 deficit in housing transactions in the UK compared to pre-financial crisis levels. The report found that a decline in home movers was the predominant cause for the dip and explored the reasons why this was the case. The full report can be accessed here: https://www.cml.org.uk/news/cml-research/
During May, buy-to-let activity was driven by remortgage lending, which accounted for over two thirds of total lending. The number of loans for buy-to-let property purchase advanced in May remained low compared to activity seen before the change on Stamp Duty introduced last April.
The Sales Director of OneSavings Bank, Adrian Moloney, responds to the latest figures: “It’s steady as she goes for total buy-to-let lending. Purchase demand has been affected by a raft of recent tax and regulatory changes, which came into play this year, discouraging some amateur landlords. However, remortgaging activity is buoyant and its popularity is unlikely to wane in the face of landlords’ growing tax burdens, while many can still capitalise on record low interest rates to reduce their outgoings.
“As the industry looks ahead to PRA II [Prudential Regulation Authority Phase 2], we may see somewhat of a surge in activity, as investors look to complete deals before further changes come into play for portfolio landlords.”
Ishaan Malhi, the Founder and CEO of online mortgage broker Trussle, also comments: “While the housing market has been fairly subdued in recent months, remortgaging activity has remained resilient, thanks to the continued availability of attractive deals, which are encouraging more people to switch.
“This market has a far greater capacity than its current operating levels, as there are two million people in the UK unnecessarily sitting on Standard Variable Rate mortgages; likely to be paying far more interest than they would on the best market rates. If we’re to see remortgaging numbers rise further, as they should, more homeowners need to proactively manage their loan and switch to a better deal when their initial term is coming to an end.”
And finally, the Director of mortgage broker Private Finance, Shaun Church, adds: “Although lending picked up in May, the market remains subdued. The lack of available housing continues to limit lending volumes and, while supply-side issues persist, we are unlikely to see a significant increase in lending. A sluggish remortgage market has also contributed to disappointing overall figures, with the CML reporting that, on a seasonally adjusted basis, lending for remortgage has fallen every month since January.
“There are some clear positives to be taken from these figures, however. Lending remains stable in spite of wider political and economic uncertainty, suggesting the market has robust foundations. Demand from buyers continues to be supported by low mortgage rates and a growing number of products.”