Remortgages in UK hit nine year high but buy to let still subdued

Remortgages reached a nine year high in the UK in the first month of 2018 while first time buyer loans also increased but the buy to let sector remains subdued, the latest home lending figures show.

There were 49,800 new home owner remortgages completed in January 2018, some 19.1% more than in the same month a year earlier and the highest monthly number since November 2008, according to the data from UK Finance.

The £8.9 billion of remortgaging in January 2018 was 20.3% more year on year. It is suggested this was because a number of fixed rate mortgages would have come to an end and also speculation about an interest rate rise may have encouraged home owners to act.

The data also shows that there were 24,500 new first time buyer mortgages completed in January 2018, some 7% more than in the same month a year earlier. The £4 billion of new lending was 11.1% up year on year. The average first time buyer is aged 30 and has a gross household income of £41,000.

There were 25,000 new home mover mortgages completed in January 2018, up 6.4% year on year and the £5.4 billion of new lending in the month was 10.2% higher on an annual basis. The average home mover is 39 and has a gross household income of £55,000.

In the buy to let sector there were 5,600 new mortgages completed in January 2018, down 5.1% year on year and by value the £0.8 billion of lending in the month was the same year on year.

There were 16,500 new buy to let remortgages completed in January 2018, up 17.9% compared to the same month a year earlier. By value this was £2.6 billion of lending, up 18.2% year on year.

‘Remortgaging in January reached a nine year high, as a number of fixed rate mortgages came to an end while borrowers locked into attractive deals amid expectations of further interest rate rises,’ said Jackie Bennett, director of mortgages at UK Finance.

‘While an increase in remortgaging is expected in the New Year as people put their household finances in order, this strong growth is above the seasonal fluctuations we tend to see at this time of year,’ she pointed out.

‘There was the usual dip in both first time buyers and home movers over the festive period, but mortgage lending in both segments increased compared to the same period in 2017. However, growth in the buy to let market remains subdued, reflecting the ongoing impact of recent tax and regulatory changes,’ she added.

It’s positive to see an increase in lending to first time buyers, according to Richard Sexton, director of e.surv chartered surveyors, but he believes that more needs to be done to encourage movement in the second stepper and last time buyer market.

‘Ultimately, lack of supply remains an issue. With many existing homeowners feeling unable to move due to financial restrictions, this is causing a bottleneck. Although yesterday’s Spring Statement revealed stamp duty relief has helped 60,000 first time buyers, maybe it’s time we start thinking about those higher up the ladder too in order to boost supply,’ he said.

Indeed, Steve Seal, director of sales and marketing at Bluestone Mortgages, believes there is evidence that help is needed for others such as the self-employed to help them onto the housing ladder.

‘Successful business owners, entrepreneurs and contractors are being turned away by high street lenders for not fitting traditional lending standards. This is unfortunately leading to many being unable to secure home ownership,’ he said.

‘With self-employed workers now making up 15% of the UK workforce, more needs to be done by our industry as a whole to understand their background on a case by case basis. Until then, specialist lenders will support these borrowers and give them the chance they deserve,’ he added.

A rush to remortgage in light of rate rise speculation has caused activity in the market to soar, according to Shaun Church, director at mortgage broker Private Finance. ‘Rumours that interest rates could be on the up in a matter of months has caused borrowers to take action and rightly so, locking in the incredibly competitive and favourable rates currently available. With a rate rise on the cards for as early as May, borrowers considering remortgaging but yet to do so should act sooner rather than later to ensure they don’t miss the boat,’ he said.

‘Remortgaging activity is also propping up what is otherwise a subdued and stagnant buy to let market. Tax changes and regulations seem to be having the desired effect by continuing to deter would be buy to let investors, while current landlords are looking to make their investments as lucrative as possible by capitalising on the favourable fixed rates currently on offer,’ he pointed out.

‘The first time buyer market is continuing to flourish. Government initiatives such as Help to Buy and Stamp Duty cuts are clearly starting to bear fruit, and with Theresa May’s pledge last week to galvanise house builders into building more homes, it would appear that the prospects of first time buyers are finally and firmly on the up. In the not so near future we could also the average age of first time buyers edge back into the twenties bracket, a true sign that housing affordability is improving,’ he explained.

He added that lenders are keen to get a slice of this first time buyer market, and are adapting their product ranges accordingly, with features such as multiple borrower mortgages and higher loan to income products becoming more prevalent.