Mortgages  

Brexit hits mortgage lending

Brexit hits mortgage lending

First full month of lending data from the Council of Mortgage Lenders following the EU referendum showed a month-on-month decline in first-time buyer and home mover activity and muted activity on the buy-to-let market.

First-time buyers borrowed £4.4bn in July, which equated to 28,200 loans, down 17 per cent compared with June.

But the number of loans advanced to first-time buyers was higher than any other month this year.

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Home mover activity was at its third highest monthly level this year by volume and by value in July, after March and June.

On a seasonally adjusted basis, first-time buyers and home movers decreased by volume 13 per cent and 7 per cent respectively in July compared to June, but the number of loans to first-time buyers increased 8 per cent compared to July last year, while the number of loans to home movers decreased 7 per cent year-on-year.

Affordability metrics for first-time buyers remained relatively stable.

The typical loan size decreased to £133,000 in July from £135,700 in June, while the average household income of borrowers purchasing their first home also decreased slightly from £40,400 in June to £40,100 in July, which meant the income multiple was unchanged at 3.55.

The average amount borrowed by home movers in the UK increased to £171,400 in July from £171,000 in June, and the average household income of a home mover also increased to £55,000 from £54,700. This meant the income multiple went up from 3.26 to 3.29 month-on-month.

Paul Smee, director general of the CML, said: “These figures cover the first full month of lending following the EU referendum.

“They show a month-on-month decline in first-time buyer and home mover activity and muted activity on the buy-to-let market.

“It is hard to determine whether these figures reflect a first uncertain reaction to the referendum vote, or are a sign of a market which was already cooling. It will be quite some time before a full assessment can be made.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: ‘The first full month of lending following the referendum reveals a lack of confidence, with a decline in the number of first-time buyers and home movers.

“The pick-up in remortgaging compared with the previous month underlines this state of affairs, with borrowers no doubt selecting fixed-rate mortgages in order to find some much-needed certainty.

“Typically July can be a quiet month and we would expect August’s figures to further underline this trend. But already in September we are seeing renewed interest from people keen to get deals done.

“Lenders will have one eye on year-end targets and we expect to see some cracking deals over the coming months. Fixed-rate mortgages seem to go ever lower with lenders keen to out-do each other, which is great news for borrowers.’