Mortgage activity in UK housing market picked up in August

Home lending in the UK picked up in August with the latest figures from UK Finance showing that mortgages reached their highest level since March 2016.

Lending to first time buyers increased both on a monthly and an annual basis but the buy to let market is still subdued, falling month on month and unchanged from August 2016 and remortgaging also declined.

First time buyers borrowed £5.7 billion, up 16% compared to July and up 12% from August last year and the number of mortgages in this sector increased by 14% month on month and 9% year on year.

The figures also shows that home movers borrowed £8.4 billion, up 18 month on month and up 20% year on year with the number of mortgages up 17% on a monthly basis and up 13% compared to August 2016.

However, remortgaging by home owners totalled £6.4 billion, 4% less than in July but still up 8% year on year. The number of people remortgaging was down 1% month on month but up 5% year on year.

Buy to let lending totalled £3.1 billion, down 3% month on month and the same as in August last year. This equated to 20,400 mortgages, the same as in July but 4% down year on year.

‘Activity picked up in August, and recent resilience ensured that borrowing by home movers was at its highest since March 2016, when transactions were boosted by an imminent increase in stamp duty,’ said UK Finance’s head of mortgages policy June Deasy.

‘Over the last 12 months, the number of people remortgaging has been higher than in any period since late 2009. With mortgage rates close to historic lows and the likelihood of a rise in official rates moving closer, the popularity of remortgaging looks set to continue,’ she added.

The data also shows that the average amount borrowed by a first time buyer increased from £138,999 in July 2017 to £140,035 while the average amount borrowed by movers increased from £180,000 to £182,750 and borrowing for house purchase by buy to let landlords remains at a lower level than before the introduction of the higher stamp duty rate in the spring of 2016.

Any improvement in activity levels for house purchase is welcome news but the industry is waiting to see if the base rate will be increased in the coming weeks, according to David Hollingworth at L&C Mortgages.

‘Although mortgage rates remain extremely competitive, there has already been an upward shift in fixed rates due to the heightened expectation of a rate rise. That could see the nudge up in the percentage of first time buyer income spent on mortgage payments continue,’ he said.

‘At the same time the shift in mortgage rates will no doubt sharpen the focus of those that have yet to take advantage of the record low rates. Any move in the base rate is bound to be met with a spike in remortgage activity,’ he added.

The increase in first time buyer lending is encouraging, according to Steven Seal of Bluestone Mortgages. ‘The UK has suffered a serious shortage of affordable homes for first time buyers due to increasing prices caused by a bottleneck of good property coming to market over the last few years. However, the positive growth in first time buyer lending also means we may finally be seeing a rebalancing in supply and demand of affordable property,’ he said.

But he believes that more needs to be done to help first time buyers in the UK. ‘High street lenders are still blocking many new home owners from joining the housing market due to their outdated products and criteria which do not reflect the changing workforce. Many of our first time buyer customers are successful small business owners, entrepreneurs or contractors who, without the aid of specialist lending products, would not be able to buy their own home,’ he added.