They took out 53,800 loans, up 13% on April and 5% on May 2015, according to the Council of Mortgage Lenders which said that some equilibrium is coming back into the home lending market.
A breakdown of the figures show that first time buyers borrowed £4.3 billion, up 10% on April and 23% on May last year. This equated to 27,500 loans, up 9% month on month and 16% year on year.
Home movers borrowed £5.1 billion, up 19% on April but down 2% compared to a year ago. This represented 26,300 loans, up 18% month on month but down 5% on May 2015.
The data also shows that remortgage activity totalled £5.2 billion, down 15% on April but up 30% compared to a year ago. This came to 30,900 loans, down 12% month on month but up 25% compared to a year ago.
Landlords borrowed £2.6 billion, up 4% month on month but down 4% year on year. This came to 16,600 loans in total, up 3% compared to April but down 8% compared to May 2015.
‘There was a sense of the market regaining some equilibrium in May, following the stamp duty driven spike in March and the subsequent dip in April,’ said Paul Smee, director general of the CML.
‘For the second month running, first time buyers borrowed more than home movers, the first time in 20 years that this has been the case. Buy to let continues at lower levels as expected, after the change to stamp duty,’ he pointed out.
However, he also pointed out that Brexit, and its likely effect on the market, is a question to which the answer will not immediately be forthcoming. ‘Lenders will continue to be open for business as usual, but lending volumes may be affected by uncertain consumer sentiment,’ he added.
The CML report also shows that affordability metrics for first time buyers have remained relatively stable. The typical loan size increased to £131,000 from £130,000 in April, while the household income of borrowers also increasing slightly from £39,700 in April to £40,000 in May, which meant the income multiple went up from 3.46 to 3.51.
Home movers showed a similar trend with the average amount borrowed increasing to £166,000 from £163,000 in April, and the average household income of a home mover also increasing to £53,300 from £52,500. This meant the income multiple went down from 3.26 to 3.25 month on month.
Remortgage lending saw a month on month decrease in May but a year on year increase by both volume and value, reaching levels similar to those in the first three months of the year.
Gross buy to let lending continues to be lower than usual as expected after the surge in activity to beat the stamp duty changes on second properties ahead of the 01 April deadline.
Meanwhile, buy to let house purchase lending is under half what it was in the months leading up to the stamp duty changes, whereas buy to let remortgage is by value 10% lower than levels seen in January and February before the surge in activity in March.
According to Andy Knee, chief executive of LMS, the mortgage market in May appeared confident, with the value of borrowing up year on year for home owners, first time buyers and remortgagors but buy to let lending was down when compared to May 2015, hampered by the change to Stamp Duty.
‘The surprise result in the UK vote to leave the EU does mean a certain volatility in the housing market will ensue in the coming months and it is not yet clear exactly how this will play out, but we’re seeing little evidence anecdotally of purchases or transactions falling through,’ he said.
‘The Bank of England looks likely to lower the base rate to a new historic low of 0.25%, which could ensure competitive mortgage rates continue to be offered, presenting an opportunity for existing homeowners to remortgage and reduce their outgoings. However, this is not all good news as lender appetite for risk will be lower in the current economic climate, which could hamper chances for some first time buyers,’ he added.
David Whitaker, managing director of Mortgages for Business, believes that as the industry effectively processed three months’ worth of business in March because of the rush to beat the stamp duty surcharge and then there is the effect of Brexit, it may not be until September’s figures are released in November before the impact of all the tax changes and Brexit on the buy to let mortgage sector can be properly assessed.
‘At a guess I think we can expect the market to remain less vibrant until both the political and economic direction of travel for the country as a whole is more clearly defined. That said, in a post-Brexit world, people will still need homes and renting will remain in sharp demand. Property investors’ long term prospects remain positive,’ he added.
