Remortgaging boosts home lending in the UK but expected to soften in coming months

Lending to home buyers in the UK in July was lower than in the preceding month but higher than a year earlier, led by a strengthening of remortgaging, according to the latest figures to be published.

Figures from UK Finance show that first time buyers borrowed £5 billion, some 15% lower than in June but 14% higher than in July 2016. They took out 30,400 mortgages, down 16% on the preceding month but up 8% year on year.

Home movers borrowed £7.1 billion, some 9% less than in June but 15% more than in July last year. This equated to 32,800 loans, down 10% on June but up 10% on July 2016.

Remortgaging by home owners totalled £6.7 billion, some 12% more than in both the preceding month and in July last year. The number of people remortgaging totalled 36,800, up 7% on June and 10% higher than a year ago.

Buy to let lending totalled £3.2 billion, some 7% higher than in June and 7% higher than in July last year, equating to 20,500 mortgages, 5% more than in June and 9% more than in July last year.

‘Remortgaging strengthened in July and reached its highest level since January, with customers attracted by borrowing rates that are at or close to their historic low point. The increase in activity in July means that, over the last year, the number of people remortgaging has been at its highest since 2009,’ said UK Finance’s head of mortgages policy June Deasy.

‘Lending for house purchase was lower in July than in the preceding month, and we expect the market to continue to soften a little in the coming months,’ she added.

Home owners are remortgaging for added financial security, according to Andy Knee, chief executive of LMS. He pointed out that a record number of remortgagors are opting for five year deals to take advantage of low mortgage rates.

‘However, the warning signs remain ever present. Inflation rose to 2.9% in August and mortgage rates could soon follow suit. For the time being, lenders will continue to offer consumers competitive deals. Home owners looking to remortgage should do so in the near future to avoid missing out on low rates and monthly savings,’ he added.

Shaun Church, director at Mortgage Broker Private Finance, believes it is a good sign that buy to let lending improves, mostly remortgaging. But he warned that new regulatory changes coming into force at the end of the month will make accessing mortgage finance harder for landlords with multiple properties.

Affordability is still an issue for younger first time buyers, according to Jeremy Duncombe, director of the Legal & General Mortgage Club. ‘House price inflation may have slowed, but a general lack of housing supply continues to make the path to home ownership a difficult one,’ he said.

‘This is a problem that the Government must address by building the thousands more homes we need for Britain’s next generation of home owners. At the same time, we must raise awareness about the valuable role of professional advice for those who might be concerned about the ongoing uncertainty of Brexit, and as an industry demonstrate the positive impact this can have on helping thousands of borrowers to secure a better deal,’ he added.

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