First time buyer mortgage market leads home lending data

Lending to first time buyers increased in February with official figures showing that completions increased year on year for a fifth month in a row.

There were 24,880 new first time buyer mortgages completed, up 4.1% compared to February 2018, according to the data from trade body UK Finance.

The data also shows that there were 23,660 home mover mortgages completed, up just 0.1% year on year and there were 18,200 new remortgages, a year on year rise of 10%.

The average loan to value ratio in the remortgaging market was 57% while the average loan to income ratio was 2.74. This is considerably lower than mortgages for house purchases which showed an average loan to value ratio of 72% and a loan to income ratio of 3.37.

The UK Finance report says that customer engagement in the remortgaging market remains high with borrowers able to access a wide range of competitive products.

But the buy to let lending market is weaker. There were 4,800 new buy to let home purchase mortgages completed in February, down 7.7% year on year and there were 14,400 remortgages, up 2.1% year on year.

So, while buy to let house purchases continue to contract due to tax and regulatory changes, buy to let remortgaging has increased as borrowers move from fixed rate mortgages and lock into new attractive rates.

‘These figures confirm that the housing market is shrugging off the political and economic uncertainty around Brexit, and the number of house sales is at a slightly higher level than at the same time in 2018,’ said Mike Scott, chief property analyst at online estate agent Yopa.

‘The delay to the Brexit date has now removed the short-term anxiety around the next few months, and so we expect the market to remain strong as we move into the busiest time of year for home sales, before the normal slowdown for the summer,’ he added.

Richard Pike, Phoebus Software sales and marketing director, believes that the figures show that the mortgage market is managing to keep ahead compared to 2018 in most areas. Buy to let purchases continue to struggle but that, like many areas that require an element of investor risk, could be being affected by continued Brexit uncertainty,’ he said.

‘It is difficult to overstate the impact that the current negotiations between Westminster and Europe are having on the UK as a whole. We have been in a state of limbo since Article 50 was triggered and there is still no sign of a solution. This is, of course, having a knock-on effect and it is highly likely that the figures we will see in the coming months, which reflect the run-up to the original withdrawal deadline, will be more subdued,’ he added.

Meanwhile, the Intermediary Mortgage Lenders Association (IMLA) points out that the latest Bank of England Credit Condition Survey shows that the mortgage market is currently highly competitive and that tighter affordability requirements, coupled with Brexit effects on borrower confidence and a subdued buy to let market, has spurred lenders to move into the higher loan to value space and to explore specialist areas such as later life borrowing or the self-employed.

‘Lenders are likely to be cautious, however, in terms of going up the risk curve: the loans that have been advanced at higher LTVs over the past five years show exceptionally low arrears by historical standards, and this is welcome,’ said Kate Davies, IMLA executive director.

‘Consumers have been able to benefit from the market competition and the resulting reduction in mortgage spreads, particular on higher LTV products. But, as our recent New Normal report identified, with lenders having to hold more capital against mortgages as a result of the changes to the Basel regime, it may be that mortgage spreads cannot go much lower,’ she explained.

‘The market is likely to continue to be challenging in terms of the volumes of business that can be written at sustainable margins. Lenders will no doubt develop new and innovative products to meet consumers’ needs, but must do so within the inevitable constraints of the regulatory and prudential framework,’ she added.