MortgagesJul 12 2018

Mortgage market sees a pre-summer boost from remortgaging

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Mortgage market sees a pre-summer boost from remortgaging

The mortgage market has seen a pre-summer boost as the number of first time buyers increased and remortgaging continued on an upward trend.

The latest mortgage trends update from UK Finance for the month of May showed there were 32,200 first time buyer mortgages completed in the month.

This was some 8.1 per cent more than in the same month a year earlier.

The data, which was published today (12 July), found £5.4bn of new lending was issued in the month, up 12.5 per cent year-on-year.

It found the average first time buyer was aged 30 with a gross household income of £42,000.  

There were also 36,000 homeowner remortgages completed in the month, 7.1 per cent more than in the same month a year earlier.

A total of £6.3bn was lent on remortgages, representing a 6.8 per cent upswing year-on-year.

Jackie Bennett, director of mortgages at UK Finance, said: "The mortgage market is seeing a pre-summer boost, driven by a rise in the number of first-time buyers and strong remortgaging activity.

"It is also particularly encouraging to see an increase in home movers, after a period of relative sluggishness in this important segment of the market."

But she added: "Affordability remains a challenge for some prospective buyers and this is reflected by a gradual increase in loan to income multiples."

Meanwhile, 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, Ms Bennett said.

UK Finance's data also found there were 31,100 home mover mortgages completed in the month, some 4.4 per cent more than in the same month a year earlier.

The £6.6bn of new lending in the month marked a 4.8 per cent upswing on the previous year. The data found the average home mover was 39 years old and had a gross household income of £55,000.

However, Martin Stewart, founder of London Money, disputed the figures, saying said he has not seen this upward trend in London.

He said: “I would like to see these figures broken down nationally because being a London centric broker I am not too sure those figures will be repeated locally.

"I have seen plenty of stats to say the market is struggling in London and that there are more houses being listed for sale than in previous years – a year too late if they were hoping for peak prices."

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said the figures suggested interest rates were likely to rise sooner rather than later but he warned this could have consequences.

He said: "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."

UK Finance found there were 5,500 buy-to-let (BTL) home purchase mortgages completed in the month, which is some 9.8 per cent fewer than in the same month a year earlier.

By value this was £0.7bn of lending less in the month, 22.2 per cent down year-on-year.

But there were 14,600 BTL remortgages completed in the month, some 15 per cent more than in the same month a year earlier.

By value this was £2.3bn of lending more in the month, 21.1 per cent more year-on-year.         

Simon Heawood, chief executive of Bricklane, said the results showed individual amateur BTL was becoming less viable.

He said: "Recent moves by the government to tax it more heavily mean potential investors are looking for alternatives, while 2.5 million existing landlords must weigh up the economics on their existing holdings.

“Alongside the raft of new tax penalties it’s important to remember that BTL has always been an investment that brings huge concentration risk, and requires large commitments of capital and time.

"We expect to see more and more investors looking for alternative tax-efficient routes into property, whereby they can access returns as they would from any other asset class, without the drawbacks of going it alone as a buy-to-let landlord.”

This comes as the latest RICS UK Residential Market Survey for June 2018 found sales activity in the UK housing market remains subdued.

The data found that over the month, newly agreed sales have recorded the sixteenth successive month of continued decline, with 7 per cent more respondents reporting a fall in agreed sales.

aamina.zafar@ft.com