Latest figures reveal a slowdown in lending to UK home movers

Gross mortgage lending in the UK reached £18.4 billion in April, some 11% lower than the previous month but 4% higher than a year ago, the latest figures show.

The slowdown comes despite some of the most attractive mortgage deals ever being available thanks to historic low interest rates and the data from the Council of Mortgage Lenders suggests it is those taking advantage of these that are keeping the market going.

CML senior economist Mohammad Jamei revealed that home mover activity has been subdued for some time as the lack of supply affects the housing market.

‘First time buyers and remortgage customers appear to be buoying the market, as low mortgage rates are encouraging borrowers to remortgage and attractive Government schemes are helping first time buyers,’ he said.

‘We expect this trend to continue over the coming months. The low number of movers means fewer properties for sale. This supply and demand imbalance will continue to underpin house price values, even as the rate of price rises slows,’ he added.

According to John Eastgate, sales and marketing director of OneSavings Bank, a general reduction in consumer confidence coinciding with an increase in inflation is affecting the lending market although he believes it is likely to be only temporary.

‘I don’t see any long term trend being established by these figures. Inflationary pressures will pass and low rates will continue, and the mortgage market will remain robust,’ he said.

John Goodall, chief executive officer of buy to let specialist Landbay, also believes it is not a long term trend. ‘With cheap finance helping many first time buyers to step on the ladder, and encouraging home owners to remortgage, the dip in activity is likely to be a blip,’ he said.

The downturn in lending should not be a surprise, according to Henry Woodcock, principal mortgage consultant at IRESS. He pointed out that the slowing market has been there since the beginning of the year and lending in the buy to let sector is down 80% over the last year since the stamp duty hike in March 2016 as landlords have viewed the tax changes imposed under the new rules as ‘penalties’.

‘We must keep in mind that all things are relative and the market has been in rude health for quite some time now so a slowdown is not altogether unexpected. There are plenty of buying opportunities at the moment with a Bank of England rate rise unlikely to happen before 2019,’ he explained.

‘It’s now 10 years since the last rate rise, and this low interest rate environment has boosted remortgage activity and stimulated fierce competition between lenders, with house buyers now able to secure some great deals. I don’t think the general election itself is likely to have any significant effect on the market either way. I expect it to remain relatively steady for the foreseeable future,’ he added.

Shaun Church, director at independent mortgage broker Private Finance, thinks that the current twin track mortgage market is preventing any substantial growth in lending as home movers are opting to stay put, creating a lack of new properties coming onto the market.

‘Lending levels are therefore being maintained, but are struggling to kick up a gear. Demand for borrowing certainly isn’t expected to die down any time soon but the lack of property supply threatens to put a dampener on mortgage activity in the long term, with rising house prices and poorer affordability conditions an inevitable side effect,’ he said.