However, the number of loans and value for home-owner house purchase remained relatively steady compared to June last year, with the number of loans decreasing slightly but the amount borrowed increasing. There was a relatively similar trend in activity for home-owner house purchase in the second quarter overall.
Gross lending in June totalled £20.1bn, up 25% on May and 13% up on June last year. In Q2, gross lending came to £52.2bn, up 17% on the previous quarter and a 2% rise on the second quarter 2014.
Overall in June, the value of home-owner loans for house purchase accounted for 54% of gross lending, while remortgage activity accounted for 25%. Buy-to-let as a proportion of total lending remained at around 17% but still makes up a larger portion of total lending compared to the same time last year.
Competitive mortgage rates mean first-time buyers are paying a record low proportion of their monthly household income in June to service the capital and interest rate payments of their mortgage. At 18.2%, this is the lowest level since the CML began tracking it in 2005.
Home movers spent 17.9% of their monthly gross household income to pay capital and interest repayments, down on last month and the same period last year. Like first-time buyers, this is the lowest it has been since the CML began tracking this data.
Remortgage activity showed a sudden sharp rise in activity in June, after a muted beginning of the year, rising in both volume and value by over a third compared to both the previous month and June last year.
Buy-to-let lending for house purchase has performed more strongly than the home-owner loans for house purchase for most of the year, which in part is due to buy-to-let lending declining more than home-owner loans during the downturn. It currently accounts for 17% of gross lending in June.
Overall, buy-to-let lending rose sharply in June, increasing both month-on-month and year-on-year. While buy-to-let house purchase rose significantly, these increases are driven more by strong buy-to-let remortgage activity. A similar trend was seen in the second quarter as a whole, although the increases in volume and value were more muted.
Paul Smee, director general of the CML, commented:
“Notable this month is the uptick in remortgage activity among home-owners, perhaps reflecting an increased desire to lock into competitively-priced mortgage deals in advance of any rise in rates. It is likely that people are now beginning to feel a rate rise is a realistic prospect, and not just a distant theoretical possibility.
“After a slower than expected start to the year, lending now appears to be picking up as we expected, and in line with our recently revised forecasts.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said:
"The post-election recovery in the housing market continues apace with lending to first-time buyers, home movers and landlords all up on the previous month. Buyers who may have put decisions on hold are now more willing to take the plunge. With July continuing to be busy, despite the summer getaway, confidence has clearly improved.
"There is more remortgaging activity which comes as no surprise given recent comments from the Bank of England over interest rates. A few lenders have increased their fixed-rate pricing but there are still plenty of excellent deals available and will continue to be, as lenders compete for business. Lenders continue to struggle to meet volume targets and will absorb much of any underlying increase in Swap rates via lower margins.
"Buy-to-let continues to perform well, with lending up on both new purchases and remortgaging. Lenders like buy-to-let as it is easier to underwrite than residential borrowing and there are better margins. It remains to be seen whether the recent changes to claiming mortgage interest relief and the wear and tear allowance will have a negative impact on the sector. Remortgaging has been particularly strong and we expect this to be the case in coming months as borrowers critically assess their investments and look at ways of maximising their profits. We expect the majority of investors will still consider buy-to-let to be a good investment and carry on regardless."
Paul Hunt, Phoebus Software managing director, added:
“In April 2008 remortgage activity accounted for 62% of all mortgages (BBA). The uplift in remortgage activity in June, although welcome, is still well below previous levels at 32%, so there is definitely the potential for further increases in this part of the market. The inevitability of the first raft of interest rate rises, predicted for early 2016, could be the catalyst that will urge homeowners to look now at their current mortgage deals and seek some longer term security before rates begin to rise. It is definitely the sector within the mortgage market to watch in the coming months.”
