Mortgage lending sees yearly uptick: CML

First-time buyers, home movers, home-owner remortgage and buy-to-let all saw a monthly decline in lending in August but an uptick (significant for buy-to-let) compared to August 2014, according to the latest figures from the Council of Mortgage Lenders.

Related topics:  Mortgages
Amy Loddington
13th October 2015
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This is a normal seasonal trend, with August typically less strong for mortgage completions, and the underlying picture is of improvement in lending levels on a year-by-year basis.  

House purchase lending in the UK saw a month-on-month decline by volume and by value for the first time since April this year. However, this was the third consecutive month that lending for house purchase increased year-on-year by volume and by value. This was the highest house purchase lending activity level for the month of August since August 2007. However, volume levels this month were still only 60% of what they were in August 2007.  

As previously reported, UK gross lending in August totalled £19.7bn, down 9% on July but up 10.7% on August last year.  

Overall in August, home-owner loans for house purchase accounted for 57% of gross lending (57% in July), while remortgage activity accounted for 21% (24% in July). Home-owner loans as a share of gross lending have increased since the new year while remortgage activity has edged down. Buy-to-let lending as a proportion of total gross lending remained at 17%, a consistent level since the beginning of the year, but up from 13% in the same period last year.

First-time buyers accounted for 44% of total house purchase lending volumes, a much higher proportion than pre-crisis levels of 30% of the number of loans for house purchase. 

Remortgage activity dropped month-on-month in August 17% by volume and 18% by value compared to July. However, in parallel to house purchase activity, there was a year-on-year increase compared to August 2014 by volume and by value, up 11% and 20% respectively.

Buy-to-let lending for house purchase has showed stronger year-on-year growth than home-owner loans for house purchase for most of the year, which in part is a market recovery response as buy-to-let lending declined more than home-owner lending during the downturn. While loans to home-owners for house purchase declined by 50% in volume terms from 2007 to 2009, buy-to-let loans for house purchase declined 71% in the same period. Buy-to-let continues to represent 17% of gross lending in August, a proportion that has remained relatively consistent since the beginning of the year.

Overall, buy-to-let lending decreased in August compared to July, but saw substantial year-on-year increases by volume and value compared to August 2014. 

Bob Pannell, chief economist of the CML, commented:

"Seasonal factors pushed all categories of lending lower in August compared to July. However, the mortgage market continues to see year-on-year growth, and we expect this to continue over the coming months."

Mark Harris, chief executive of mortgage broker SPF Private Clients, says: 

"As usual, August proved to be quieter on the mortgage front than July but the improvement on August last year underlines the continuing strength and growth in lending levels. The indicators are good for the rest of the year, with September proving to be very busy although this is not yet reflected in the CML figures. 

"Excellent mortgage rates continue to attract buyers and those remortgaging as lenders remain keen to do business in order to meet their targets. 

"Fixed rates on buy-to-let mortgages have moved below 2 per cent for the first time - a phenomenally low rate which will be attractive to landlords keen to keep costs down since the changes to mortgage interest tax relief announced in the Summer Budget. Buy-to-let lending saw considerable year-on-year increases and the attraction of the sector is undiminished, even if landlords may think twice in the future before investing to ensure the numbers add up.

"With first-time buyers accounting for 44 per cent of total lending volumes, a much higher proportion than pre-crisis levels of 30 per cent, the trend for lenders to offer higher loan-to-value mortgages continues. Yet it is encouraging that first-time buyers are not over stretching themselves, with the proportion of income to service mortgage payments continuing to fall year-on-year."

Danny Waters, Chief Executive Officer of Enterprise Finance, said:

“While it is traditional that the first-time buyer and home mover market experiences something of a summer slowdown – which goes some way to explaining August’s figures – it is more of a surprise to see remortgage activity decline so sharply, especially with interest rates historically so low. This may be the first sign that competitive products aren’t quite as easy to come by as they were earlier in the year and that mortgage lenders are casting increasingly nervous glances the Bank of England’s way.

John Phillips, national operations director at Just Mortgages, added:

"With low interest rates, the continued increase in new mortgage products and higher LTV lending, it is little surprise that the amount of loans for house purchase and the number of first time buyers have seen a steady increase in levels.

“Interestingly, this is the third consecutive month that lending for house purchase increased year-on-year in both value and volume. Therefore, as the mortgage market continues to see year-on-year growth, this suggests the underlying picture is one of a continued lending recovery and I expect to see a gradual improvement in the UK’s mortgage market activity in the coming months.”

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