UK mortgage lending holds steady so far this year
The UK mortgage market has remained stable despite the upheaval and uncertainty since the Brexit vote, according to Jeremy Duncombe, the director of the Legal & General Mortgage Club. His comments followed figures from banking representatives group UK Finance, which demonstrated the first-time buyer sector had grown by 26% to 36,000 loans in June compared with the previous month, while mortgage lending in Q2 reached £34.4bn ($44.2bn), a rise of 18% on the previous quarter and 24% up on the same period in 2016. Buy to let borrowing reached £8.4bn, down 6% compared with Q1 but up 5% on the second quarter of 2016.

First time buyer activity continued to grow in the UK in June with lending to this sector up by 26% compared to the previous month and up 9% year on year.

The latest figures from UK Finance show that this equated to 36,000 loans, up 22% month on month and 6% year on year.

The data also shows that home owner remortgage activity totalled £6 billion, up 5% by value on May and 7% year on year with loans totalling 34,300, up 5% month on month and 6% on a year ago.

Gross buy to let totalled £3 billion, up 3% on May and up 3% compared to June 2016. These equated to 19,700 loans, up 3% month on month and 6% year on year.

On a non-seasonally adjusted basis, UK Finance data shows that mortgage lending in the second quarter also rose. Home buyers borrowed £34.4 billion, up 18% quarter on quarter and 24% on the same quarter in 2016.

Within this, first time buyers borrowed £14.8 billion, up 18% and 10% while home movers borrowed £19.6 billion, up 19% and 21%. Home owner remortgage activity totalled £16.9 billion, down 11% by value on the first quarter but up 1% on a year ago.

Gross buy to let totalled £8.4 billion, down 6% compared to the first three months of the year but up 5% on the second quarter of 2016.

‘June’s figures show a busy month in the mortgage market, with home movers having their highest monthly activity levels for over a year and an especially high number of loans for first time buyers,’ said Paul Smee, head of mortgages at UK Finance.

‘Buy to let activity remains subdued compared to its 2015 peak but consistent month to month since stamp duty changes in April 2016. But there are also signs of a softening market and we are not anticipating that this performance will be sustained in the second half of 2017,’ he pointed out.

‘A slightly lop-sided market could well show some growth in house purchase lending but alongside reduced remortgage and buy to let activity,’ he added.

The figures also show that affordability metrics for first time buyers saw the typical loan size increase from £137,000 in May to £139,000 in June. The average household income increased to £41,000 from £40,500. This meant the income multiple went up from 3.58 to 3.59.

The average amount borrowed by home movers in the UK increased to £180,000 from £177,000 the previous month, while the average home mover household income increased month-on-month from £54,900 to £55,200. The income multiple for the average home mover went up to 3.39 from 3.37.

Buy to let activity was driven by remortgage lending which accounted for over two thirds of total lending. Buy to let house purchase and remortgage activity in June remained consistent with monthly levels seen since the change on stamp duty on second properties introduced in April last year.

Jeremy Duncombe, director of the Legal & General Mortgage Club, pointed out that the figures show that a year on from the European Union referendum, the mortgage market has remained stable in the face of ongoing political uncertainty.

‘As these figures show, lending remains buoyant and buyers are mostly undeterred. For borrowers who are unsure about the market, professional advice has been crucial in helping to make the right choices and find the best mortgage deal amidst the political upheaval,’ he said.

‘Long term affordability issues continue to have an impact though. Although house price inflation is at its lowest level in four years and beginning to align with inflation, lack of supply and the barrier of stamp duty is still leaving many hopeful first-time buyers facing a mountain to climb. Increasing housing supply and addressing the possibility of a stamp duty exemption for first and last time buyers must remain at the top of the Government’s housing agenda,’ he added.