The mortgage market enjoyed a pre-summer boost, with continued growth in remortgaging as well as an uptick in lending to first-time buyers.
However, the latest UK Finance figures show that the buy-to-let market continues to be flat.
In total there were 36,000 remortgages completed in May, an increase of 7.1 per cent on the same month a year ago.
This accounted for £6.3bn of lending, a 6.8 per cent increase year-on-year. These figures come on the back of several months growth in the remortgage market.
There was even stronger growth in the first-time buyer market. A total of 32,000 first-time buyer mortgages were completed in May, an 8.1 per cent increase on May 2017.
These loans were worth £5.4bn, a 12.5 per cent increase, year-on-year. According to UK Finance the average first-time buyer is aged 30 and has a gross household income of £42,000.
There was also an increase in lending to homemovers. In total there were 31,100 of these mortgages completed in May, a modest 4.4 per cent increase on the same month a year earlier. This accounted for £6.6bn of new lending, a 4.8 per cent increase year-on-year.
According to UK Finance figures, the average homemover is aged 39 and has a gross household income of £55,000.
In the buy-to-let market there were just 5,500 new purchase mortgages completed, a 9.8 per cent decrease on May 2017’s figures. By value this amounted to just £0.7bn of lending, a significant 22.2 per cent decrease year-on-year.
However remortgaging in the buy-to-let market remains buoyant. In total there were 14,600 of these mortgages completed in May, a 15 per cent increase year-on-year. This accounted for £2.3bn of lending, a 21.1 per cent increase.
UK Finance’s director of mortgages Jackie Bennett says: “It is particularly encouraging to see an increase in homemovers after a period of relative sluggishness in this important segment of the market.
“However, affordability remains a challenge for some prospective buyers and this is reflected by a gradual increase in loan to income multiples.”
She pointed out that purchases in the buy-to-let market continued to be constrained by recent regulatory and tax changes, the full impact of which have yet to be fully felt.
Bricklane’s chief executive Simon Heawood says: “[These figures] show that individual amateur buy-to-let is becoming less viable.”
He says that landlords “must weigh up the economics on their existing holdings”.
These calculations should include the impact of any future rate rise, making the cost of refinancing more expensive.
Former RICS chairman and north London estate agent Jeremy Leaf says: “After yesterday’s better-than-expected economic growth figures, these strong numbers from UK Finance reinforce the view that interest rates are likely to rise sooner than later.
“Unfortunately, any imminent rate rise is likely to have a disproportionately negative effect on already brittle confidence.
“On the ground business is still one month up, one month down with no clear pattern other than a fairly fragile price-sensitive market where confidence is weak at best.”
Phoebus Software sales and marketing director Richard Pike says this increase in remortgage is not surprising. He says: “Looking at the figures for May it is important to remember that many of the mortgages completed would have been agreed up to three months before. In February we were being warned by the Bank of England to expect a rate rise sooner rather than later, which gave many people the impetus to ensure a lower rate by remortgaging.”
However he added that the increase in homemover loans would indicate that measures to help first-time buyers is having an effect further up the property ladder.