Despite mortgage lending remaining robust in February, buyers face “mixed fortunes”, according to the Council of Mortgage Lenders.
The CML said that monthly mortgage lending fell 8% to £18.2 billion in February, slightly up on the £18.1 billion lent a year ago.
This is the third month in a row mortgage lending has fallen and it is the lowest figure since May last year, just after the 3% increase in stamp duty was introduced.
CML senior economist Mohammad Jamei said the market was currently being driven by first-time buyers and remortgagers.
“Mortgage lending is holding up well, but under the surface buyers face mixed fortunes. First-time buyers and customers who are remortgaging are driving total lending, while home movers and buy-to-let remain weak,” Jamei said.
“The weakness in home movers means few properties are coming onto the market for sale, which is aggravating a supply demand imbalance that has characterised the market since late 2013. This looks set to continue at least over the next few months, posing an obstacle for would-be borrowers,” he added.
In August, the Bank of England cut the base rate for the first time in seven years to 0.25%, prompting mortgage lenders to slash rates.
With the number of competitive deals on the market growing, many borrowers are choosing to remortgage to take advantage of the low rates currently on offer.
Last year, the government increased stamp duty by 3% on buy-to-let properties and second homes.
Mortgage interest relief for residential buy-to-let properties is also set to be reduced to the base income tax rate from April.
These regulation changes have dampened demand from landlords in buy-to-let market, allowing more first-time buyers to get a foot on the property ladder.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “Gross mortgage lending held up well in February but if you drill down and look at the figures in more detail, you get a clearer picture of what is actually happening on the ground. Of particular note is that first-time buyers are taking advantage of more friendly purchasing conditions and in some cases taking the place of buy-to-let investors who have been squeezed by tighter tax and operational restrictions.
“Looking forward, the spring market is already showing signs of some improvement from the rather dull conditions prevailing in the first few months of the year but once again it is only those buyers and sellers who are prepared to be realistic who are making transactions happen.”
John Eastgate, sales and marketing director of OneSavings Bank, said: “A nine-year high for gross mortgage lending in January proved that mortgage demand is effervescent, but given the record highs, some moderation was to be expected and is arguably welcomed.
“The Brexit effect and the base rate cut have driven mortgage rates to all-time lows, supporting mortgage activity, most prominently in remortgaging. While buy to let purchases have seen a dip since the changes to stamp duty costs last year, the sector has also seen a surge in demand from landlords refinancing to take advantage of low rates to reduce their costs.
“We should expect to see remortgage activity continue to drive lending levels in 2017 as a lack of supply and stretched affordability, will continue to subdue the purchase market.”
