Home lending in UK up by 8.5%, but some sectors seeing falls in recent months

Lending for home purchases in the UK increased by 8.5% year on year to £43.5 billion in the third quarter of 2015, according to the latest data from the Bank of England.

However, the data also shows that the proportion of lending to first time buyers decreased in the quarter by 0.3% to 20.4% while the value of residential loans advanced to first time buyers increased by £0.6 billion from the third quarter of 2014 to £12.7 billion.

 The buy to let proportion of lending also decreased from 15.8% in the second quarter of 2015 to 15.6% in the third quarter of 2015 but increased by 1.3% from the third quarter of 2014.

Advances, which include by to let remortgages, increased over the past year from £8 billion advanced in the third quarter of 2014 to £9.7 billion in the third quarter of 2015. This is the highest level of advances since the first quarter of 2009.

Buy to let balances outstanding were £174 billion in the third quarter of 2015, which, at 14.5% of total residential balances is the highest proportion since the series began in 2007.

The data also shows that the proportion of remortgages decreased from 26.2% in the second quarter of 2015 to 24.1% in the third quarter while the proportion of other new lending decreased from 3.6% to 3.4%.

The proportion of gross advances at a loan to value (LTV) of over 90% decreased by 0.7% to 2.8% in the third quarter of 2015 while the proportion of gross advances to borrowers with a single income multiple of more than four time increased by 0.9% to 10.3%.

According to Peter Rollings, chief executive officer of Marsh & Parsons, we can expect to see borrowing advance further after the Chancellor’s stimuli unveiled in the Autumn Statement.

‘With £15 billion of funding for housing measures taking prominence in his agenda, this will have given the green light to a queue of first time buyers, particularly in London, where there will be a designated Help to Buy scheme to reflect the accelerated house price growth in the capital, and the extra booster needed to help buyers onto the ladder,’ he said.
 
‘First time buyers have already been making tracks in the third quarter and in London we’ve seen this as part of wider demographic shift as domestic players and mortgage buyers become more prevalent in the housing market, while overseas investors take a temporary step back to digest the higher stamp duty payable on top-end purchases,’ he explained.

‘But proportionally, across the country, remortgaging activity has been taking up a larger chunk of the lending pie recently, as existing home owners try to build up their defences ahead of an expected interest rate rise in 2016. But the rankings may change in the run up to April’s stamp duty increase for second homes, and buy to let lending is likely to rev up quickly, as investors act before the finishing flag for current conditions,’ he added.

It is a major concern to see high LTV mortgage lending on the wane at a time when the wider market is in ruder health, according to Patrick Bamford, director of mortgage insurance Europe for Genworth.

‘New government schemes such as the Help to Buy Isa and Help to Buy shared ownership are gearing up to full throttle to offer more support for first time buyers. But the Help to Buy mortgage guarantee is set to finish at the end of 2016, and the prospects for the overall LTV market look significantly bleaker without some form of guarantee in place,’ he said.
 
‘Transferring the scheme to the private insurance industry would make affordable mortgages with realistic deposits permanently available to hopeful buyers, while maintaining prudent checks and long-term stability for the market,’ he concluded.