It was first time buyers who kept the market going in London, borrowing 10% more while those remortgaging borrowed less, the figures from the Council of Mortgage Lenders (CML) shows. They also increased in Scotland and Wales.
Overall borrower took out 17,500 loans, down 17% on the previous quarter and 8% compared to the second quarter 2015 but first time buyers borrowed £3 billion, up 3% on the first quarter and 10% compared to the second quarter last year. This equated to 10,800 loans, up 3% quarter on quarter but down 1% year on year.
Home movers borrowed £2.5 billion, down 41% on quarter one this year and 14% compared to a year ago. This equated to 6,700 loans, down 37% quarter on quarter and 18% year on year.
The figures also show that remortgage activity totalled £4.3 billion, up 6% on the first quarter 2016 and 29% compared to a year ago. This came to 14,200 loans, up 5% quarter on quarter and 19% compared to a year ago.
‘First time buyers have continued to drive mortgage lending in London, with 10% more first time buyer lending in the second quarter than the first. The opposite is true for home movers, probably just reflecting a rebalancing after the very strong first quarter as many buyers sought to complete purchases before changes to stamp duty,’ said Paul Smee, director general of the CML.
‘The second quarter data largely pre-dates the European Union referendum. While it will take time to see how Brexit may affect the market, the London mortgage market clearly remains active and firmly open for business,’ he added.
First time buyers were also key in Scotland, borrowing £920 million, up 42% quarter on quarter and 2% year on year, some 8,500 loans, up 39% quarter on quarter and 4% year on year.
Home movers borrowed £1.2 billion, up 11% quarter on quarter but down 5% compared to a year ago. This totalled 8,100 loans, up 11% quarter on quarter but down 9% year on year.
Remortgage activity totalled £850 million, up 9% both on the first quarter 2016 and the second quarter 2015. This came to 7,100 loans, up 11% quarter on quarter and 4% year on year.
Carol Anderson, CML Scotland chair, pointed out that it is the 19th successive quarter of growth in first time buyers compared to a year earlier and the highest quarterly number of first time buyer loans since the middle of 2007.
In Wales first time buyers borrowed £420 million, up 31% on the first quarter and 24% on the same period last year. This totalled 3,800 loans, up 31% quarter on quarter and 19% year on year.
Home movers borrowed £490 million, down 6% on the first quarter of the year but unchanged compared to the same period in 2015. This came to 3,400 loans, down 6% both quarter on quarter and year on year.
Remortgage activity equated to £450 million, up 7% on the previous quarter and 18% compared to a year ago. This came to 4,000 loans, up 8% quarter on quarter and 11% year on year.
‘Mortgage lending in Wales in the second quarter saw highest quarterly volume of first time buyer loans since the middle of 2007 and the highest volume of remortgage loans since the middle of 2013,’ said Julie Ann Haines, CML Cymru chair.
She pointed out that while home mover lending dipped slightly this was most likely simply a rebalancing after the previous quarter's rush ahead of the stamp duty changes in April.
‘The data reflects activity predating the EU referendum, so we will have to wait to see how the vote to leave will affect the market in Wales. It is likely to take time for that to be fully understood, but clearly the mortgage market is firmly open for business in Wales,’ she added.
The trend was also seen in the latest mortgage market tracker report from the Intermediary Mortgage Lenders Association (IML) which shows there was a higher proportion of lending to first time buyers in the months preceding the EU referendum vote.
In the second quarter of the year some 57% of first time buyer enquiries resulted in agreement-in-principles, up from 51% in the previous quarter.
Overall it found the mortgage market remained in robust health in the lead up to the Brexit vote, with lenders remaining open for business despite average enquiries falling in April, May and June as buyers showed caution in the run-up to the referendum on 24 June.
Indeed, the average number of enquiries received from first time buyers and home movers was 46, both down from 55 in the first quarter of the year. Remortgagors showed slightly more caution, with average enquiry levels dropping to 38 compared to 48.
‘A dip in enquiry volumes is no more than might be expected in an atmosphere of growing uncertainty. It suggests some buyers reined back on purchasing property in the second quarter, possibly waiting to see the outcome of the EU referendum and any impact on property prices,’ said Peter Williams, IMLA executive director.
‘However, those that pressed on with a mortgage enquiry saw more success in getting an agreement-in-principle, as lenders continued supporting the market despite the political headwinds. This is encouraging news for the many borrowers who will continue to rely on the mortgage market to move onto or up the housing ladder,’ he pointed out.
‘Next quarter we will have a clearer view of the consequences of the Brexit vote although this is by no means the only element impacting upon supply and demand in the market. The increased tax burdens for landlords from stamp duty reforms, changes to the wear and tear allowance, and the upcoming reduction in interest relief, may see many remortgage to a lower rate as one way of clawing back some lost income,’ he explained.
‘Borrowers must now find their way in the new ultra-low interest rate environment. Mortgage pricing is already very low and fixed rate mortgages are unlikely to fall further due to being priced from the swap curve. However, savers may well feel the difference of falling rates. Any inflation rise would further eat into any savings, making building the cash for a deposit more challenging. The new climate is certainly better for borrowers than for savers,’ he added.
