More loans were taken out to purchase a property in the first two months of 2017 than any year since 2007, driven by a rise in first-time buyer activity.
First-time buyer borrowing surged ahead in February, suggesting that government policies designed to curb the buy-to-let market are working.
According to the Council of Mortgage Lenders, first-time buyers borrowed £3.8 billion in February – up 6% on January and 12% on February 2016.
Landlord borrowing for the month remained unchanged in February at £800 million.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “The encouraging point about the CML report is the improvement in first-time buyer lending.
“This underlines what we are finding in our offices – that first-time buyers are taking advantage of a level playing field now that so many buy-to-let investors are choosing not to add to their portfolios but rather, are staying put and even selling in some cases.”
Home movers borrowed £5.1 billion, up 6% on the previous month but down 4% for the year.
However, there was a dip in homeowner remortgaging in February, with activity falling 26% to £5.2 billion.
It was the strongest February for the number of loans advanced in 10 years, although borrowing was relatively low compared to monthly activity over the past twelve months.
Home movers and first-time buyers took out a combined total of 48,600 loans.
Paul Smee, director general of the CML, said: “Borrowers took out more loans to purchase a home in the first two months of 2017 than any year since 2007.
“This is down to strong first-time buyer activity which has consistently matched home mover borrowing over the past six months, a trend not seen in the UK for 20 years.
“House purchase activity on the buy-to-let lending side remains weak. This trend is expected to continue because of the tax changes from April and because lenders are tightening affordability criteria in response to PRA-mandated stress tests.”
Jeremy Duncombe, director at Legal & General Mortgage Club, said: “It is unsurprising that buy-to-let borrowing has weakened year-on-year. With the layering of several control measures and the recent tax changes coming into force, we have seen fewer landlords enter the market, and purchase business has suffered. The shape of the buy to let market is changing, and the outcome of all the changes could impact tenants as rents increase and some stock is sold to counter the increasing burden on landlords.”
“Today’s CML figures show that demand for lending, particularly to first time-buyers, remains strong. As the market continues to grow, new borrowers are benefiting from historically low mortgage rates, which are helping an increasing number of people take their first steps onto the property ladder. Despite a monthly fall, remortgaging activity remains up annually as some homeowners use this opportunity to save money and switch to a more competitive deal.”
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