Gross mortgage lending down in UK in first month of 2017
Gross mortgage lending in the UK reached £18.9 billion in January, some 6% lower than December’s lending total of £20 billion, but 2% higher than a year ago.
The latest data from the Council of Mortgage Lenders (CML) suggests that overall the mortgage market is holding up but according to senior economist Mohammed Jamei there is a twin track market.
He explained that weakness in buy to let and home movers has been offset by an increase in first time buyers and remortgage lending. ‘But a continuing acute shortage of homes being offered for sale is one aspect of a broken housing market, that looks unlikely to resolve in the near term,’ he said.
He also pointed out that gross lending has been stable since last April, averaging £19.6 billion each month on a seasonally adjusted basis, even although transactions fell back.
‘Adjusting for seasonal factors, our estimate of lending for January would be around £21 billion. On an unadjusted basis, lending was £18.9 billion, as the beginning of the year is usually weak for gross lending,’ Jamei added.
He also said that given recent trends, it looks likely that first time buyers and remortgage activity continue to be the drivers of lending and that this shouldn’t come as much of a surprise as most Government schemes have been aimed at helping boost first time buyer numbers.
As a result, there were 339,000 first time buyers in 2016, an increase of 8% over 2015. Home movers on the other hand fell slightly to 360,000, marking three years in which movers have effectively remained at the same level.
‘This continues to hold back the market, as very few homes are being put up for sale. CML regional data shows in some areas, such as greater London, the number of home movers fell to their lowest levels for 25 years, highlighting the acuteness of this issue. The imbalance is likely to continue underpinning house price values,’ Jamei concluded.
Simon Checkley, managing director of Private Finance, believes that buy to let and home mover activity are still suffering the effects of the stamp duty surcharge and tougher affordability criteria and lack of property supply continues to be a concern and is contributing to rising housing costs.
‘There has also been a notable slowdown at the upper end of the housing market. While addressing this is unlikely to score any political points, transactions must flow across the entire market for it to be healthy,’ he pointed out.
‘Buy to let lending is struggling, and upcoming tax changes will test the market further. Wealthier landlords, particularly those able to buy outright, will reap the rewards thanks to high demand and limited rental supply,’ he explained.
‘But smaller investors are likely to struggle: this can only spell bad news for renters, ironically at a time when the Government is increasingly shifting the focus away from homeownership. Policymakers need to remember that specific market segments do not exist in isolation, and a healthy rental market relies on support for landlords as well as tenants,’ he added.
The trend ahead is unlikely to change, according to John Goodall, chief executive officer of buy to let lender Landbay. ‘Borrowers continue to take advantage of record low interest rates, and a growing number of loan to value deals, both of which are helping keep the market buoyant despite a number of economic and regulatory headwinds,’ he said.
‘The year ahead could see a continuation of this trend, as changes to buy to let tax relief and the introduction of tighter underwriting standards make it more difficult or more complicated for aspiring homeowners and landlords to access the finance they need,’ he explained.
‘But, as the Housing White Paper recently highlighted, the Government is awake to the housing crisis, especially within the private rented sector, and is willing to take swift action to address it. All eyes now turn to the March Budget, where we hope to see this sentiment translate into iron cast commitments,’ he concluded.
