A breakdown of the figures show that first time buyers borrowed £4.6 billion for house purchases, up 10% on September and October last year. This totalled 29,900 loans, up 8% month on month and 3% year on year.
First time buyer lending grew for the second month in a row, to be the joint highest monthly lending level, alongside July 2015, by volume and by value since August 2007. Competitive mortgage rates mean first time buyers continue to pay low levels of their monthly household income to service the capital and interest rate payments of their mortgage at 18.4% in October.
Home movers took out 35,400 loans, up 9% month on month and 3% compared to October 2014. In total, this was £7.1 billion borrowed, up 8% on September and 13% year on year.
The October figure was only behind July this year for the highest amount borrowed since 2007. Home movers spent 18.2% of their monthly gross household income to pay capital and interest repayments, slightly more than last month but a decrease compared to September 2014.
Home owner remortgage activity also increased, up 6% by volume and 10% by value compared to September. Compared to October 2014, remortgage lending was up 19% by volume and 34% by value. This is the most amount of remortgage loans in a month since January 2009, and the most amount borrowed for remortgage since June 2008.
Gross buy to let saw month on month increases up 4% by volume and 3% by value, but more substantial growth year on year to the highest monthly gross buy to let lending level by value and by volume since the CML began tracking buy to let data on a monthly basis in January 2013. Buy to let remortgage is currently driving this with larger year on year growth compared to October 2014.
‘Home owner and buy to let activity have both continued the upward trend seen last month, and the market looks set to finish the year strong, despite taking time to gain momentum after a slow start to 2015,’ said Paul Smee, director general of the CML.
‘With increasing employment and the current absence of inflationary pressures in the UK, conditions for continuing demand in the housing market seem likely going into the new year. How supply will respond to this challenge going forward is a crucial question for 2016,’ he added.
The data also shows that house purchase lending in the UK in October saw an increase by volume and by value of mortgages advanced compared to September and October last year. This was the second highest monthly house purchase levels, after July 2015, since 2007.
As previously reported, UK gross lending overall in October totalled £21.9 billion, up 9% on September and 19% on October last year. This is the highest monthly gross lending figure since July 2008.
Steve Bolton, founder of Platinum Property Partners, said that the increase in buy to let lending is because landlords can also benefit from the highly competitive rates available on the market to drive down their monthly costs.
‘While critics of the buy to let sector will be quick to suggest that this increase in lending is at the expense of first time buyers and home movers, the data indicates this isn’t the case. Lending to these groups has also increased over the past 12 months, and while the buy to let market has grown at a faster rate, this has been from a much lower base. A lack of adequate property supply is a far greater barrier to home ownership than buy to let will ever be,’ he explained.
‘With high house prices putting a strain on affordability and increasing numbers of people preferring to rent, landlords are providing society with an important service. Upcoming changes to landlords’ tax relief and an increased level of stamp duty on buy to let properties could damage this vital sector. Landlords struggling to stay in the black will be forced to increase rents, and many could be dissuaded from entering the sector, resulting in fewer properties, neither of which will lead to increased levels of home ownership,’ he pointed out.
‘Some buy to let business models are better positioned than others to withstand the higher costs on the horizon. Houses in Multiple Occupation (HMOs) maximise rental income and can therefore absorb increased costs far more easily than single occupancy investments. This rental model also makes highly efficient use of existing housing stock while providing renters with social and affordable accommodation,’ he added.
