UK home lending market sees rise in first time buyers but buy to let still slow

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A rise in first time buyers and strong remortgage activity boosted the home lending market in the UK in May, the latest figures show, but buy to let loans are still declining.

There were 32,200 new first time buyer mortgages completed in the month, some 8.1% more than in the same month a year earlier while the £5.4 billion of new lending in the month was 12.5% up year on year, according to the data from UK Finance.

There were 31,100 new home mover mortgages completed in the month, up 4.4% compared to the same month a year earlier and the £6.6 billion of new lending in the month was 4.8% higher year on year.

There were 36,000 new home owner remortgages completed, up 7.1% compared with May 2017 and the £6.3 billion of remortgaging in the month was 6.8% on an annual basis.

But the buy to let mortgage market is still declining. There were 5,500 new buy to let home purchase mortgages completed in the month, some 9.8% fewer than in the same month a year earlier. By value this was £0.7 billion of lending, down 22.2% year on year.

There were 14,600 new buy to let remortgages completed in the month, some 15% more than in the same month a year earlier. By value this was £2.3 billion of lending in the month, 21.1% more year on year.

‘The mortgage market is saw 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,’ said Jackie Bennett, director of mortgages at UK Finance.

‘However, 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 continue to be constrained by recent regulatory and tax changes, the full impact of which have yet to be fully felt,’ she added.

May’s lending data is a perfect snapshot of the sea change in the property market in recent years, according to Jonathan Samuels, chief executive officer of property lender Octane Capital.

‘First time buyers are in the ascendancy while amateur landlords are beating a fast retreat. What activity there is within buy to let is primarily the remortgaging of existing portfolios or properties in order to maintain some kind of margin. While professional landlords and institutional investors remain active, amateur landlords are fast becoming an anachronism,’ he said.

But John Phillips, group operations director at Just Mortgages and Spicerhaart, believes that the overall figures are the most encouraging for some time, but he warned that more still needs to be done to help the market move more freely.

‘We are starting to see a glimpse of some of the strong first time buyer activity of 2017, and even more encouragingly, an uplift in home mover activity. This section of the market has been really slow of late, with affordability and a lack of houses making it tough for second and third steppers to make their next move,’ he said.

‘However, while these figures are encouraging, it could be more to do with a pre-summer boost than a real step change. Because overall, more needs to be done to help home movers. Recent research revealed that second steppers are having to borrow an average of £24,450 to be able to take the next step on the housing ladder, and that on average, former firs -time buyers are having to pay £7,346 just on the stamp duty to be able to move on,’ he explained.

‘Stamp duty is the biggest barrier to a freer housing market, and if it was cut altogether, or at least cut significantly, it would have a hugely positive impact, not just on the housing market, but the economy as a whole,’ he added.

Shaun Church, director at Private Finance, believes that competition within the mortgage market is also helping to boost first time buyer numbers, making mortgages both attainable and affordable.

‘Increasingly we’re witnessing lenders relax their criteria and offer incredibly competitive rates and deals to attract business from this burgeoning area of the market. There are plenty of great deals to be enjoyed on the market and those looking to buy their first home should make sure they shop around to ensure they’re opting for the best deal for them,’ he said.

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Written by: Houseladder