Mortgage market experiences pre-summer boost in May 2018

Written by Oliver Wade
12/07/2018

In May, there were 32,200 new first-time buyer mortgages completed, representing an 8.1% increase compared to the same month a year earlier, according to the latest figures from UK Finance’s Mortgage Trends Update.

The £5.4bn of new lending in the month was 12.5% more year-on-year, with the average first-time buyer being 30 and having a gross household income of £42,000.

The report revealed that, throughout the month, there were 31,100 new homeowner mortgages completed, which is 4.4% more than in May 2017 and the £6.6bn of new lending in the month was 4.8% more year-on-year. According to the statistics, the average homeowner is 39 and has a gross household income of £55,000.

The remortgaging market also experienced a significant level of growth, with 36,000 (7.1% more than May last year) completed in May 2018. The £6.3bn of remortgaging in the month was 6.8% more year-on-year.

However, during May there were 5,500 new buy-to-let (B2L) home purchase mortgages completed, which is almost 10% less than the figures reported in May last year. By value this accounted for £0.7bn of lending in the month, a 22.2% decline on last year’s figure.

Despite this, the number of B2L remortgage completions in May grew by 15% compared to the same month a year earlier, with 14,600 new deals written. This percentage represented £2.3bn worth of lending and indicated a 21.1% increase year-on-year.

Commenting on the findings, UK Finance director of mortgages Jackie Bennett said: “The mortgage market is seeing a pre-summer boost, driven by a rise in the number of first-time buyers and strong remortgaging activity. It is also particularly encouraging to see an increase in homemovers, after a period of relative sluggishness in this important segment of the market.

“However, affordability remains a challenge for some prospective buyers and this is reflected by a gradual increase in loan to income multiples.

“Meanwhile purchases in the buy-to-let market continue to be constrained by recent regulatory and tax changes, the full impact of which have yet to be fully felt.”

Vida Homeloans director of sales Louisa Sedgwick stated that the annual rises seen in first-time buyer and buy-to-let remortgage activity during May was “encouraging”.

“The modern borrower has a variety of different mortgage choices available and in the specialist sector of the market we have been seeing a rise in applications from first time buyers and buy to let landlords looking to remortgage. As the specialist market continues to grow this will contribute to a steady rise in figures through to the end of the year,” Sedgwick added.

OneSavings Bank sales and marketing director John Eastgate credited the “declining purchase market” to the changes in taxation for landlords, stating that it is not helped by “fragility in the housing market as a whole”.

“If we do see rental supply contract, it is renters and potential buyers that will suffer as competition pushes rents higher, as the fundamentals that are driving the growth in the PRS remain. Re-mortgaging activity by landlords remains robust as they seek lower rates and therefore lower finance costs to manage their overheads,” Eastgate said.

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Specialist FTB and BTL markets
Adam Cadle talks to Vida Homeloans director of sales - mortgages Louisa Sedgwick about the specialist first time buyer and buy to let markets

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