Decline in new mortgage lending: Bank of England and FCA

New mortgage lending declined in the last quarter of 2017, but still remained up on the year, according to new figures released by the Bank of England and the Financial Conduct Authority.

The official figures show that £69.1bn of new residential mortgages were advanced in the last three months of the year.

This was a 2.5 per cent decrease compared to the previous quarter, but a 10.1 per cent increase on the same period last year.

These figures show that there was a modest increase in first-time buyers over this period, with the proportion of loans granted to this group increasing by 0.5 per cent.

However, these figures show that the demand for buy-to-let lending continues to weaken. In total, the share of BTL lending decreased to 12.7 per cent in the last quarter of 2017 – the lowest percentage for more than five years.

The total value of outstanding residential lending stood at £1,395.5bn in the quarter, a 0.7 per cent increase on the previous three months and a 4.3 per cent rise on the same period last year.

Despite this modest increase, there was a decrease in the proportion of new loans for house purchase. This was down 1.5 per cent over the quarter. The BoE says this has been driven by a decrease in home movers.

However, the proportion of lending to those remortgaging increased by 1.4 per cent. Remortgaging now accounts for 29.7 per cent of this mortgage lending.

Mortgage experts said that the interest rise during this period buoyed these remortgaging figures, with homeowners looking to take advantage of fixed rates ahead of any further increase.

More detailed breakdown by the BoE shows that there has been a decrease in the proportion of higher LTV loans over this period. New lending in the two highest brackets (more than, or equal to 90 per cent LTV) decreased by 0.5 per cent from the previous quarter. These higher value loans now account for just 3.8 per cent of all mortgages.

SPF Private Clients, chief executive Mark Harris says the decline in home movers may be down to a number of factors, including a lack of stock, uncertainty surrounding Brexit and the fact that last three months are traditionally a quieter period of the year for the housing market.

He adds: “There was a welcome increase in the number of first-time buyers as they continue to take advantage of the more level playing field between them and buy-to-let investors.”

He says the stamp duty surcharge and the phased introduction of changes to mortgage interest tax relief continues to act impact demand for buy-to-let lending.

“This has particularly deterred would-be novice landlords, but experienced property investors remain committed to the sector, with a significant proportion choosing to incorporate,” says Harris.



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