First-time buyers received home purchase loans with a total value of £4.2 billion from their lenders in June 2015, up by nearly a quarter on May, the latest data from the Council of Mortgage Lenders (CML) shows.
The loan value change on the previous month was 23.5 per cent and the number of loans advanced increased at a similar rate, up 22 per cent to 28,300.
Although there was a good boost month-on-month, in an annual comparison lending was weak. The number of loans decreased by 2.4 per cent and the value was unchanged from June 2014.
However, affordability in June was the best since records began in 2005, the CML said. At 18.2 per cent, the proportion of their monthly household income first-time buyers used to service mortgage repayments was the lowest in the past decade. The is the result of record-low mortgage interest rates.
Home movers spent 17.9 per cent of their monthly gross household income to pay capital and interest repayments, down on last month and the same period last year. Like first-time buyers, this is the lowest it has been since the CML began tracking this data in 2005.
Home movers got 32,700 loans in June, a 21.1 per cent more than in May but just 0.3 per cent more than a year ago. The total value of these loans amounted to £6.4 billion, up 25.5 per cent on the month but only 6.7 per cent on the year.
Remortgaging was the clear winner in the monthly lending race as both the number of loans and their value rose by over a third from May. There were 31,600 remortgage loans advanced in June and their total value stood at £5.1 billion. The number of loans was 30 per cent higher on a monthly and 31.1 per cent higher on a yearly basis. The value surpassed May’s figure by 30.8 per cent and was 34.2 per cent above the value in June 2014. The high remortgaging activity is reflecting the borrowers’ urge to find better mortgage deals before the Bank of England raises the base rate.
Paul Smee, director general of the CML, commented:
“Notable this month is the uptick in remortgage activity among home-owners, perhaps reflecting an increased desire to lock into competitively-priced mortgage deals in advance of any rise in rates. It is likely that people are now beginning to feel a rate rise is a realistic prospect, and not just a distant theoretical possibility.
“After a slower than expected start to the year, lending now appears to be picking up as we expected, and in line with our recently revised forecasts.”
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Adrian Gill, director of Your Move and Reeds Rains estate agents, comments: “House purchase loans enjoyed their time in the sun in June, warming up the pace of borrowing after a markedly cooler first five months of the year. The remortgage market appears to be where much of the action is taking place, as cautious homeowners and buy-to-let investors recognise which way the wind is wind is blowing, and batten down the best mortgage fixes before rate rises hit.
“June’s monthly breakthrough aside, the shine is starting to rub off first-time buyer borrowing. A shortage of affordable properties is clouding the prospects for first-timers, but while the demand hasn’t gone anywhere, the goalposts have shifted. Even with a leg-up from government schemes, those looking to make their first foray onto the ladder are having to be more open-minded about what they can afford, and these home-buying incentives and cheap mortgage finance won’t hang around for ever either. In the long-term, those who can’t act now will be reliant on more housebuilding to replenish the stock of homes available, and keep mortgage repayments and deposits within grasp.”
