Remortgagors and first-time buyers are driving the housing market as the imbalance between supply and demand shows little sign of easing.
The Council of Mortgage Lenders’ (CML) latest market commentary revealed remortgaging activity grew 20 per cent year-on-year, while the number of first-time buyers rose to more than 340,000 in the 12 months to January – the highest figure since early 2008.
Gross mortgage lending for February is estimated at £18.2bn – 8 per cent less than January’s lending total of £19.8bn, but up slightly on last year’s figure of 18,069.
When adjusting for seasonal factors, February 2017’s figure is closer to £21.5bn.
There are signs of an upturn in the market as spring approaches, with house purchase approvals rising to 70,000 in January and transactions topping the 100,000 mark for the second month in a row.
Economic factors continue to dampen activity, however, as earnings growth fell to 2.2 per cent in January and consumer price inflation reached 2.3 per cent, squeezing real wages.
And there is little sign of the broad-based recovery the CML predicted at the beginning of 2016, with first-time buyers.forming the only component of transactions that has been growing.
The number of home movers remains subdued at around 360,000 on a 12-month rolling basis, and as most properties that come onto the market for sale are existing homes, activity is being held back.
Buy-to-let house purchases remain sharply down on a year earlier and are showing very little signs of recovery following changes to stamp duty rates and upcoming alterations to tax relief for landlords.
Gross mortgage lending, not seasonally adjusted
CML senior economist Mohammad Jamei said: “Mortgage lending is holding up well, but under the surface buyers face mixed fortunes. First-time buyers and customers who are remortgaging are driving total lending, while home movers and buy-to-let remain weak.
“The weakness in home movers means few properties are coming onto the market for sale, which is aggravating a supply demand imbalance that has characterised the market since late 2013.
"This looks set to continue at least over the next few months, posing an obstacle for would-be borrowers.”
Mark Harris, chief executive of London-based mortgage broker SPF Private Clients, said: “Swap rates have edged upwards on the back of rising inflation and a split in the Monetary Policy Committee at the last meeting.
“However, uncertainty over Brexit suggests interest rates are unlikely to rise anytime soon, at least until we have a better idea of what a post-Brexit world would look like.
“Mortgage rates continue to look competitive and there is plenty to tempt those remortgaging, as well as first-time buyers with some good deals available at high loan-to-values.”