Lending to first-time buyers overtakes home movers

Photo:   Images_of_Money

First-time buyers in the UK borrowed more than home movers in May 2016 for the first time in 20 years.

Figures from the Council of Mortgage Lenders show that first-time buyers borrowed £4.3bn, up 10 per cent on April and 23 per cent on May last year. This equated to 27,500 loans, up 9 per cent month-on-month and 16 per cent year-on-year.

Home movers borrowed £5.1bn, up 19 per cent on April but down 2 per cent compared to a year ago. This represented 26,300 loans, up 18 per cent month-on-month but down 5 per cent on May 2015.

Remortgage activity totalled £5.2bn, down 15 per cent on April but up 30 per cent compared to a year ago.

Paul Smee, director general of the CML, comments: “There was a sense of the market regaining some equilibrium in May, following the stamp duty driven spike in March and the subsequent dip in April. For the second month running, first-time buyers borrowed more than home movers, the first time in 20 years that this has been the case. Buy-to-let continues at lower levels as expected, after the change to stamp duty.

“Brexit, and its likely effect on the market, is a question to which the answer will not immediately be forthcoming. Lenders will continue to be open for business as usual, but lending volumes may be affected by uncertain consumer sentiment.”

UK mortgage market welcomes calm after storm

15th June 2016

The UK mortgage market has welcomed the calm after the stamp duty storm, as remortgaging continues to climb and conditions remain favourable for first-time buyers.

The stamp duty change on second properties that came into effect on 1st April 2016 resulted in activity across the market being brought forward into March, causing an expected slowdown in April’s lending figures in the aftermath. As a result, house purchase activity experienced a sharp fall month on month, which was especially evident for buy-to-let.

Paul Smee, director general of the CML, comments: “There is a sense of calm after the storm this month, as lending eased back, following the significant rises in activity in March as borrowers looked to beat the second property stamp duty deadline. We expect the market to take several months to return to its previous levels after the lending surge.”

Home-owners borrowed £8.1bn for house purchase in April 2016, down 40 per cent month-on-month and 4 per cent year-on-year. Home movers borrowed £4.3bn, down 53 per cent on March and 14 per cent compared to a year ago.

Remortgage lending was the only lending type to show both month-on-month and year-on-year increases in April. April saw the highest volume of loans for remortgage in a month since July 2009, and the highest lending value for remortgage since January 2009: Remortgage activity totalled £6bn, up 25 per cent on March and 40 per cent compared to a year ago.

Conditions are favourable for first-time buyers, though, with affordability metrics for new buyers remaining relatively stable. First-time buyers borrowed £3.9bn, down 11 per cent on March but up 15 per cent on April last year. This equated to 25,100 loans, down 9 per cent month-on-month but up 7 per cent year-on-year.

Patrick Bamford, Business Development Director for AmTrust Mortgage Insurance, highlights the “instrumental” support of Help to Buy in encouraging borrowing to first-time buyers.

“[Help to Buy 2 proved] that mortgage insurance is an effective tool in supporting first time buyers while mitigating risk to the lender,” comments Bamford. “When this ends later this year, our concern is that lending to first time buyers with small deposits will fall back into steep decline. The lending industry will therefore need to find a solution, such as private mortgage insurance, to sustain high LTV lending and ensure those with smaller deposits are not disenfranchised from entering the property market.”