Gross mortgage lending in UK up in July but expected to slow again

Gross home lending by all mortgage providers in the UK for July is estimated at £23 billion and accounting for seasonal factors, this figure is above the average lending figures seen over the past year.

First time buyers and remortgage activity on the part of home owners has supported lending for some time, but UK Finance expects the pace of growth to slow slightly, dampened by a potentially more challenging economic outlook.

The data shows that British banks approved 1,587 mortgages for house purchases last month, up from 40,385 in June and 9% higher than in July 2016.

‘Steady levels of mortgage activity seen through the first half of the year continued into July. First time buyer numbers continue to be strong, helped in part by Government schemes. But that has been offset by home movers, where a shortage of homes on the market is limiting their activity,’ said Eric Leenders, head of personal at UK Finance.

According to John Goodall, chief executive of buy to let specialist Landbay, while the residential market is a hive of activity, the buy to let market is in a state of steady growth.

‘The recent buy to let tax changes and new underwriting criteria have pushed some amateur landlords out of the market, but professional landlords are filling that void at the same pace. Indeed we may yet see a spike in buy to let borrowing ahead of the PRA changes for portfolio landlords in October, as investors make changes to their portfolios before the stricter lending criteria take root,’ he explained.

However, Alastair McKee, managing director of independent mortgage broker One 77 Mortgages, believes that many amateur landlords still reeling from the raft of punitive tax changes and it is first time buyers who are benefitting from Help to Buy and low interest rates.

‘The Help to Buy initiative is providing additional momentum, incentivising more and more people to make that first step onto the property ladder. With house prices under pressure and the cost of borrowing so low, first time buyers are increasingly seeing the current market as a window of opportunity,’ he pointed out.

‘Remortgage activity also remains robust, with a growing number of households locking into fixed rates to protect themselves against any potential interest rate rises. We don’t expect fireworks in the autumn, but neither do we expect the mortgage market to fizzle out,’ he added.

Shaun Church, director at mortgage broker Private Finance, pointed out that competition between lenders means borrowers have a growing number of competitive products to choose from, but not all segments of the market are performing well.

‘The buy to let sector has yet to recover from being bludgeoned by repeated regulatory changes. Properties at the upper end of the market continue to suffer the consequences of changes to stamp duty, restricting flow of movement in the market and contributing to the lack of new homes coming up for sale,’ he added.

But Jeremy Duncombe, director of the Legal & General Mortgage Club, warned that more needs to be done to encourage even more first time buyers. ‘To encourage a real boost in lending figures, we need greater help for first time buyers to get them onto the ladder without having to wait years to save for a deposit, or rely on the Bank of Mum and Dad,’ he said.

‘Although Help to Buy and Shared Ownership schemes can make it easier to take the first step, further incentives can be put in place to boost numbers, such as a reduction or exemption from stamp duty. The Government would do well to reconsider the use of this tax and address the ways in which it is acting as a barrier to home ownership,’ he explained.