The first time buyer mortgage sector has reached its highest level since 2007, but home mover loan rates are still falling, the latest industry figures show.
Overall, there were 35,010 new first time buyer mortgages completed in August 2019, up 0.7% from in the same month in 2018, the highest monthly total since August 2007 when there were 35,070.
The data from UK Finance also shows that there were 35,380 home mover mortgages completed in August 2019, down 5.5% from the same month a year earlier.
There were 18,640 new remortgages with additional borrowing in August, down 2.9% compared with August 2018. For these remortgages, the average additional amount borrowed in August was £55,000.
There were 18,100 new pound for pound remortgages with no additional borrowing in August, down 2.3% compared with 2018.
The buy to let sector also continues to decline. There were 5,900 new buy to let home purchase mortgages completed in August, down 3.3% on the same month in 2018 there were 13,800 remortgages in the buy to let sector, down 0.7%.
Mike Scott, chief property analyst at full-service estate agent Yopa, pointed out that housing affordability is little changed since last year, with the average first time buyer borrowing just over 3.5 times their gross household income and spending just over a sixth of their gross income on mortgage repayments.
‘The main affordability constraint continues to be the need to find a large deposit, with the average first time-buyer mortgage advance being only 77.9% of the purchase price, with the remaining 22.1%, nearly £50,000 on average, having to be paid upfront,’ he said.
‘These figures suggest that buyer activity in the housing market is still holding up well, especially among first time buyers, despite the continuing political uncertainty. The total number of home sales in the year should be close to 1.2 million, only slightly down on the average for the past five years,’ he added.
According to Adrian Moloney, sales director at OneSavings Bank, despite mortgage levels falling, buy to let activity is heading in the right direction. ‘With uncertainty pervasive in the market and the crackdown on taxation still having repercussions for landlords’ profits, this is encouraging news and highlights the resilience of the market,’ he said.
‘At the same time, there are bargains to be had, while mortgage rates remain low and employment rates high. It seems landlords are acting now, rather than continuing to wait and see what next month’s Budget has in store. Landlords evidently continue to consider bricks and mortar to be a good investment, and with demand for rental property still high the level of activity we’re seeing now could become the new normal,’ he explained.
Paul Stockwell, chief commercial officer at Gatehouse Bank, also believes that it is the high levels of deposits that is holding back first time buyers. ‘At the start of this year, the average age of a first time buyer was 30 but this now stands at 32. The average amount of finance being borrowed compared to the value of the property is also gradually creeping up towards 80%, with a 0.4% rise on last year, suggesting buyers need those extra couple of years to scrape the money together,’ he pointed out.
Looking ahead, Nick Chadbourne, chief executive officer of LMS, believes that remortgage activity will climb in the fourth quarter of this year with a significant peak expected across October and November due to early redemption charge expiry dates.
‘Remortgaging will continue to outperform other areas of the market, with the majority of borrowers opting for the certainty of a fixed term deal. It remains to be seen whether the market’s increasing attention on 10 year fixes will result in significant product purchasing changes. The latest LMS data shows that 10 year fixed deals make up just 5% of all remortgage deals, but we could see this figure climb as low rates remain attractive to borrowers,’ he said.
