Mortgage borrowing recovers in August, despite flat BTL market

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Volumes of homeowner, first-time buyer and home-mover mortgage borrowing were up year-on-year in August, while BTL borrowing fell as tax changes continued to leave an impact.

Figures from the Council of Mortgage Lenders showed that, on an unadjusted basis, home-owners borrowed £12.2bn in August, up 14 per cent on July and a jump of 11 per cent on the same month last year.

First-time buyers borrowed £5.1bn, up 13 per cent on July and 24 per cent on August last year. This equated to 31,800 loans, up 12 per cent month-on-month and 19 per cent year-on-year.

Home-mover trends were also up on annual basis, but less significantly, increasing by 3 per cent to £7.1bn compared to a year ago. This was made up of 34,200 loans, up 14 per cent month-on-month and 2 per cent on August 2015.

CML director general Paul Smee says: “House purchase activity bounced back from a dip in July, reflecting resilience in first-time buyer activity.  Mortgage rates remain at or close to historic lows, and the re-pricing of mortgages following August’s base rate cut should help to underpin a continuing, strong appetite for home-ownership over the coming months.

Remortgage activity jumped 41 per cent from August of last year but fell 2 per cent on July 2016. This amounted to 34,900 loans, up 4% month-on-month and 40% compared to a year ago.

However, the volume of landlord borrowing fell 12 per cent year-on-year, down 12 per cent, and remained flat from July.

Smee adds: “Buy-to-let continues to operate at lower levels five months after the stamp duty change on second properties. This appears to be a long-term trend, and with lenders potentially tightening affordability checks ahead of the tax changes in April 2017, activity on the buy-to-let house purchase side may well remain at current levels.”

Responding to the figures, north London estate agent and former RICS residential chairman Jeremy Leaf says they “show that the initial caution following the referendum result all but disappeared in August.

“There was an immediate nervousness following the referendum result and it is not unreasonable that people paused to reflect on how it would affect their lives.

“However, since then we have seen an increase in activity although buyers are still relatively slow to commit until they are sure they have achieved what they think are the best possible terms.”