Mortgage activity fell in UK in April, but still ahead year on year

Mortgage activity in the UK fell in April compared with the previous month with lending to home buyers down by 14% but it is still up 19% compared wit

Mortgage activity in the UK fell in April compared with the previous month with lending to home buyers down by 14% but it is still up 19% compared with a year ago, the latest figures show.

Overall buyers borrowed £9.6 billion, while first time buyers share amounted £4.1 billion, down 16% on March but up 8% on April 2016, while home movers borrowed £5.5 billion, down 11% on March but up 28% year on year.

The figures from the Council of Mortgage Lenders also show that home owner remortgage activity was down 16% by value and 18% by volume on March and year on year it was down 15% by value and 16% by volume.

Buy to let lending is also down, falling 17% by value month on month and 16% by volume. Year on year this sector saw the number of loans up1% but amount borrowed remained unchanged.

Paul Smee, director general of the CML, pointed out that April comparisons are distorted by the weakness last year following the stamp duty changes, and the normal seasonal lending surge in March and the seasonally adjusted picture shows lending relatively unchanged month on month across all lending segments.

‘We expect the market to remain slightly lopsided. Buy to let and home movers may well remain subdued, as they have been for the last six months. But both first time buyer and remortgage lending should maintain momentum on the coattails of the attractive deals available,’ he said.

Affordability metrics for first time buyers saw the typical loan size increase from £133,500 in March to £136,500 in April. The average household income increased to £40,700 from £40,000. This meant the income multiple went from 3.53 to 3.57.

The average amount borrowed by home movers in the UK increased to £176,500 from £172,400 the previous month, while the average home mover household income increased month on month from £54,100 to £55,200. The income multiple for the average home mover went up to 3.35 from 3.34.

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

The figures show that the market remains open to young buyers at a time when mortgage rates are at record lows, according to Richard Sexton, director of chartered surveyors e.surv, but for the large numbers of wan to be buyers unable to save for a deposit, home ownership remains out of reach.

‘Our country’s lack of housing supply is in part to blame for this, as we are simply not building enough affordable homes to cater for current demand. To help boost market fluidity, and nurse the sector back to health, we need a significant investment in building new homes to help ensure that those who wish to buy are able to,’ he said.

Alastair McKee, managing director of independent mortgage broker, One 77 Mortgages, pointed out that the market one sided, attracting first time buyers but deterring buy to let landlords.

‘With many landlords still reeling from the raft of tax and stress testing changes, first time buyers see an opportunity and are taking it. First time buyers are finally able to compete with landlords and the signs are that demand will remain strong throughout the year,’ he said.

He believes that while buy to let has dropped off in the mass market, at the higher end the new regulations have had less of an impact. ‘A lot of people, especially portfolio landlords, have done very well out of buy let over the years and are in a strong position as a result,’ he explained.

‘These more committed landlords are adapting to the new regime rather than running away from it. They still see buy to let as a viable investment, just one that needs a lot more attention and management in order to maintain a margin,’ he added.

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