Lending to first time buyers and landlords rises in the UK

Home lending in the UK experience substantial growth between April and May with first time buyers among the main beneficiaries, according to the latest monthly mortgage monitor.

Meanwhile, official figures from the Bank of England show an increase in lending to landlords in the buy to let sector, the first rise since the first quarter of 2017.

A total of 66,479 mortgages were approved in May, some 6.4% higher than April, the data from the mortgage monitor from residential chartered surveyors e.surv shows, with 22.4% of lending going to first time buyers and others with small deposits, up from 20.2% the previous month.

However, there is a wide variation between the regions of the UK, with some areas boasting a much higher proportion of small deposit borrowers. In Northern Ireland 35.7% of all loans went to this part of the market while in London this ratio was 13.8%. As well as growing compared to last month, the UK mortgage market also grew compared to May 2017. There were 0.5% more loans approved this month than a year ago.

The monitor report suggests that activity may have been boosted by the rumours that the Bank of England would increase the base rate in May which it did not. The next base rate decision will be made at the end of June.

‘There was strong growth in the mortgage market in May, with approvals rising significantly compared to April. While the base rate may have stayed at 0.5% in May, speculation continues about the next increase, which appears to be coming sooner rather than later,’ said Richard Sexton, director at e.surv.

Large deposit borrowers, defined by as having a deposit of 60% or more were squeezed once again in May with the proportion of loans given to this sector of the market falling from 33.2% to 32.8% and lower than the high of 34.5% recorded in March.

Mid-market borrowers also saw their share of the market drop, falling from 46.6% in April to 44.8% in May.

‘We have seen a sharp increase in the number of small deposit borrowers this month, which will be a big confidence boost to others looking to get on the ladder soon. This is the second successive month we have seen a large rise, suggesting now is a great time if you have a small deposit,’ Sexton added.

The figures from the Bank of England show that compared to last year, there has been an increase in total gross advances of 3.3% to £62.4 billion and the share of buy to let lending has increased for the first time since the first quarter of 2017, accounting for 14.1% of new lending, up from 12.6% quarter on quarter.

‘Despite a raft of changes hitting landlords in the past couple of years, the sector is incredibly resilient. The reason for this is there are still very good returns to be had in the buy to let market despite changes to the tax regime, portfolio landlord, EPC and the forthcoming tightening of HMO rules,’ said Liz Syms, chief executive officer of Connect for Intermediaries.

‘Some people who are not serious about buy to let and not prepared for all the changes will have left the market. However landlords that have well run properties, kept to a good standard will still be making profits and, as a result, are continuing to expand their portfolios, so I think this is what we are seeing in these figures from the Bank of England. We could well have hit the bottom of the market and be on the way back up again now,’ she added.