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March saw monthly increase in mortgage lending, but figures remain down on previous year

The number of mortgages issued in March 2017was up 27% on the previous month but down 12% on the year before, according to the latest figures from the Council of Mortgage Lenders (CML).

In its latest non-seasonally adjusted figures, the CML revealed that 61,700 loans were issued in March this year. Home buyers borrowed £11.2bn, up 24% on February but down 19% on March 2016. In further highlights, the CML said:

  • First-time buyers borrowed £4.9bn for home-owner house purchase, up 29% on February and 9% on March 2016. They took out 31,500 loans, up 30% month-on-month and 12% year-on-year. 
  • Home movers borrowed £6.2bn, up 19% on February but down 33% year-on-year. This equated to 30,200 loans, up 24% month-on-month but down 28% compared to March 2016
  • Home-owner remortgage activity was up 13% by value and 14% by volume on February. Compared to March 2016, remortgage lending was up 22% by value and 24% by volume
  • Gross buy-to-let saw month-on-month increases, up 4% by value and 8% by volume. Compared to March 2016, a month which had a surge of activity ahead of the stamp duty reform introduced in April 2016, as expected the number of loans decreased 58% and the amount borrowed decreased by 60%.

During the first quarter of 2017, on a non-seasonally adjusted basis, the CML revealed:

  • Home buyers borrowed £28.6bn, down 13% on the fourth quarter 2016 and 7% on the first quarter 2016. This came to 156,000 loans, down 13% on the previous quarter and 5% on the same quarter last year
  • First-time buyers borrowed £12.3bn for home-owner house purchase, down 13% on the fourth quarter 2016 but up 10% on the first quarter 2016. They took out 78,300 loans, down 13% quarter-on-quarter but up 10% year-on-year
  • Home movers borrowed £16.2bn, down 12% on the previous quarter and 18% on the same quarter last year. This equated to 77,600 loans, down 14% quarter-on-quarter and 16% compared to the first quarter 2016
  • Home-owner remortgage activity was up 12% by value and 11% by volume on the previous quarter. Compared to the first quarter 2016, remortgage lending was up 18% by value and by volume
  • Gross buy-to-let saw quarter-on-quarter decreases, down 2% by value and 1% by volume. Compared to the first quarter 2016, the number of loans decreased 39% and the amount borrowed decreased by 40%

On a seasonally adjusted basis, however, first-time buyer, home mover, buy-to-let and remortgage activity remained “relatively unchanged” by volume and by value month-on-month. Compared to March 2016, all loan types had similar changes to the non-seasonally adjusted figures. Full seasonally and non-seasonally adjusted data is attached to this email.

“Comparing this March to last year is misleading because of the peak in activity before the stamp duty changes last Spring,” said Paul Smee, the CML’s director general. “Overall, lending trends have remained reasonably consistent. The relatively sluggish activity among home-movers stands in contrast to the growth in first-time buyer and remortgage activity, but in aggregate the market is showing broadly the levels of activity we expected. As we head into the summer, we expect a continuation of these trends, with both first-time buyer and remortgage lending expected to maintain momentum in the light of the very attractive deals currently available.”

First-time buyer and home mover activity came out of the winter seasonal dip this month with the highest monthly volumes of the year so far, the CML said. While home movers decreased year-on-year compared to March 2016, more loans were advanced to first-time buyers this year than in any month of March period since 2007.

On a quarterly basis, house purchase activity was at its weakest for two years since the first quarter of 2015. By contrast, the number of remortgage loans advanced to borrowers was at its highest since the first quarter of 2009.

The proportion of household income used to service capital and interest rates continued to be near historic lows in March for both first-time buyers and home movers at 17.2% and 17.5% respectively.

Affordability metrics for first-time buyers saw the typical loan size increase slightly from £132,200 in February to £133,500 in March. The average household income remained the same month-on-month at £40,000. This meant the income multiple went from 3.54 to 3.53.

The average amount borrowed by home movers in the UK decreased to £172,000 from £176,000 the previous month, while the average home mover household income decreased slightly month-on-month from £55,000 to £54,100. The income multiple for the average home mover was unchanged at 3.34.

Buy-to-let activity was driven by remortgage lending which accounted for nearly two thirds of total lending. The number of loans for buy-to-let house purchase advanced in March remained low compared to activity seen before the change on stamp duty on second properties introduced in April last year.

Responding to the CML’s latest figures, Ishaan Malhi, chief executive and founder of online mortgage broker Trussle, said: “While the housing market may be entering a bit of a lull, the number of people remortgaging continues to grow thanks to rock-bottom rates and increasing awareness of the possible savings among homeowners.

“This is causing competition amongst lenders in the remortgage market to heat up, with TSB making notable cuts to its remortgage rates just this week. I wouldn’t be surprised if more lenders followed suit to take advantage of this growing section of the market. This will certainly be good news for any borrowers thinking about switching.”

Harry Landy, managing director of Enterprise Finance, said: “The winter months have defied expectations, with increased activity in buy-to-let and re-mortgage lending. This is despite borrowers preparing for changes to taxation and the buy-to-let affordability checks

“The UK’s property market has proven itself to be resilient and buoyant, and we anticipate month-on-month lending will continue to pick up as we head further into spring. With house prices also picking up, now is a good time for investors, developers and homeowners to invest property. In order for them to do so successfully, increased awareness of the many financing options available to them will be vital.”

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