Home-owners borrowed £8.7bn for house purchase in February, up 4 per cent month-on-month and 21 per cent year-on-year, according to the Council of Mortgage Lenders.
On an unadjusted basis, they took out 48,000 loans, up 4 per cent on January and 12 per cent on February 2015.
First-time buyers borrowed £3.4bn, up 3 per cent on January and 21 per cent on February last year. This totalled 22,000 loans, up 3 per cent month-on-month and 11 per cent year-on-year.
Home movers borrowed £5.3bn, up 4 per cent on January and up 20 per cent compared to a year ago, racking up 26,000 loans, up 4 per cent month-on-month and up 14 per cent on February 2015.
Meanwhile, remortgage activity totalled £4.8bn, down 17 per cent on January, but up 37 per cent from a year ago. This came to 28,400 loans, down 15 per cent month-on-month, but up 24 per cent year-on-year.
Paul Smee, director general of the CML, said so far this year there have been substantial increases in house purchase and remortgage activity year-on-year.
“This reflects the sluggish market in early 2015, perhaps driven by election uncertainties. Buy-to-let has also seen substantial year-on-year increases, with particularly strong growth in remortgaging, a pattern which we have seen in the buy-to-let sector the past six months.
“Activity has been boosted by landlords seeking to complete purchases before tax changes in April,” he continued, adding that the CML does not expect activity to show such strong year-on-year growth later in the year.
| House purchase | Remortgage | |||
| FTBs | Movers | Buy-to-let | Home owners | Buy-to-let |
February 2015 | 19,800 | 22,900 | 7,900 | 22,900 | 8,100 |
January 2016 | 21,400 | 24,900 | 9,600 | 33,400 | 13,600 |
February 2016 | 22,000 | 26,000 | 10,300 | 28,400 | 13,100 |
1 month change | +2.8% | +4.4% | +7.3% | -15.0% | -3.7% |
12 month change | +11.1% | +13.5% | +30.4% | +24.0% | +61.7% |
The house purchase lending total was the most borrowed in the month of February since 2007. Mr Smee pointed out there is traditionally lower activity in the winter months compared to other seasons and first-time buyers and home movers saw little change in February compared to January, but compared to the same month last year, both grew substantially by volume and by value.
Affordability metrics for first-time buyers have remained relatively unchanged month-on-month, however, the amount borrowers are spending of their monthly gross income to service capital and interest repayments was 18.1 per cent; the lowest level since the CML began tracking this metric in 2005. Home movers are also paying at close to record low proportions of income at 18.1 per cent, down from 18.3 per cent in February 2015 and 23.8 per cent in the recent peak of December 2007.
Remortgage lending to home-owners saw a decline compared to the previous month, but had significant gains compared to February last year. This is the most amount borrowed for remortgage in the month of February since February 2009.
While gross buy-to-let lending increased month-on-month and substantially year-on-year, monthly lending levels were relatively consistent the past six months, stated the CML. Remortgaging remains the driver of increased activity recently in the buy-to-let sector, with 59 per cent of gross buy-to-let lending being remortgages, compared to just 27 per cent in the home-owner space.
Nicola Georgiou, managing director at Freedom Finance, said increased activity in the buy-to-let market at the start of the year continued into February as landlords looked to complete ahead of the new stamp duty rate introduced at the start of this month.
“Potential borrowers looking to benefit from the current low interest rates should be aware that the top rates on offer are often only available to those with perfect credit scores. Shopping around online for mortgages can negatively affect your credit score and limit the possibility of you securing the best loan for you in the future.”
peter.walker@ft.com
