Lacklustre mortgage market prompts call for more incentives for buyers

House purchase activity in the UK slowed in June while remortgaging activity remained high according to the latest industry finance figures to be published, but experts believe the market is lacklustre.

There were 34,900 new first time buyer mortgages completed in the month, down 3.6% compared to the same month a year earlier with £5.8 billion of new lending which was a drop of 1.7%.

The figures from UK Finance also showed that the average first time buyer is now aged 30 and has a gross household income of £42,000.

There were 33,700 new home mover mortgages, down 7.9% compared to June 2017 with 7.3 billion of new lending, down 6.4% year on year. The average home mover is 39 and has a gross household income of £56,000.

There were 37,400 new homeowner remortgages, some 8.4% more than in the same month a year earlier and the £6.8 billion of remortgaging was 13.3% up year on year.

The data also shows that there were 5,400 new buy to let home purchase mortgages, down 19.4% year on year and the £0.8 billion of lending was 11.1% down year on year. There were 12,600 new buy to let (BTL) remortgages, unchanged on an annual basis, and £2 billion of lending in the month, also unchanged.

‘Remortgaging continued to dominate in June with borrowing figures up 13% on the same period last year as existing two and three year products came to an end and borrowers opted for new deals,’ said Jackie Bennett, director of mortgages at UK Finance.

‘Despite a boost in recent months, speculation of a base rate rise saw the market remain relatively subdued with year on year declines in activity among both first time buyers and home movers as customers adopted a wait and see approach,’ she explained.

‘House price inflation has moderated in recent months yet it still remains above earnings growth, and so affordability is still a challenge for would-be borrowers. And although the full impact has yet to be felt, tax and regulatory changes continue to bear down on borrowing activity in the buy to let purchase market,’ she added.

According to John Phillips, group operations director of Just Mortgages and Spicerhaart, the Government needs to do something bold to get things going and he argues that a tough move such as an 18 month suspension of all stamp duty would help.

‘These latest figures show that the housing market is struggling, especially amongst home movers where activity is down 7.9%. I think the main reason for this is not that people don’t want to move, but they are reluctant to because stamp duty is so high that they are not prepared to shell out thousands of pounds just to move. So they are staying put,’ he pointed out.

‘The trouble is, while remortgaging is up, which is good, but is more to do with rate rises than anything else, the UK economy needs people to move house because it has a positive knock on effect on so many other sectors. So if the Government wants to fix this, it needs to make a bold statement,’ he said.

‘The stamp duty cut has worked for first time buyers but we need similar incentives for the rest of the market. I would like to see an 18 month suspension of stamp duty across the board. This gives the market seven months or so before the Brexit deadline in March and a year afterwards to let things settle,’ he added.

The figures were described as ‘disappointing’ by Shaun Church, director of Private Finance. ‘Despite numerous pledges and incentives from the Government to get more people onto the housing ladder, June showed a disappointing performance in the first time buyer market,’ he said.

‘Mortgage eligibility remains the key stumbling block for many prospective buyers, so the recent relaxation of lending criteria from major lenders could help boost activity among first time buyers in the future,’ he added.

Ishaan Malhi, chief executive officer of online mortgage broker Trussle, warned that the interest rate rise means higher costs ahead. ‘The average home owner on a variable rate product with £200,000 left to pay on their mortgage will see repayments increase by £300 over the course of the year as a result of the base rate hike, so switching to a more suitable deal helps to ease any immediate financial impact,’ he said.

‘While it’s good to see more people engaging with their mortgage, there are still around two million home owners sitting on high interest Standard Variable Rate mortgages, collectively overpaying billions of pounds in additional interest each year,’ he pointed out.

‘If we’re to help these people, the industry needs to make mortgage deals more transparent and ditch the jargon that currently prevents more than half of all mortgage borrowers from fully understanding important letters from their lender,’ he added.