Financial Reporter: CML: Remortgage lending at seven-year high
Remortgage and buy-to-let activity soared in January, while home-owner and home mover activity saw a seasonal dip, according to the CML.
Home-owners borrowed £8.4bn for house purchase, down 25% month-on-month but up 12% year-on-year.
The number of first-time buyers fell to its lowest monthly level since February 2015. FTBs borrowed £3.3bn – down 27% on December but up 14% on January last year.
Home mover activity was also affected by the seasonal lull, with January experiencing the lowest number of home mover loans advanced for house purchase since February 2015. However, average loan size decreased and average household income increased month-on-month, meaning income multiples decreased for home movers and the percentage of monthly household income spent to service capital and interest repayments also decreased.
In contrast to house purchase lending, remortgage lending to home-owners saw substantial increases month-on-month (35%) and year-on-year (32%), resulting in the highest lending borrowed in a single month for remortgage in the UK since January 2009.
Landlords borrowed £3.7bn in January, up 9% month-on-month and 42% year-on-year.
Paul Smee, director general of the CML, commented:
“While the unadjusted data appears to show large falls in January compared to December, stripping out the usual January lull we see a general picture of flat house purchase lending but a significant uptick in remortgage activity, as borrowers continue to seek attractive new deals despite the lower-for-longer expectations for interest rates.”
Nicola Georgiou, Managing Director at Freedom Finance, said:
“Lending has continued to rise year-on-year as first time buyers and those looking to remortgage were forced to take out larger loans as a result of ever increasing house prices. It is also interesting to note, though not surprising, that the buy-to-let market has seen an increase in house purchases month on month, as many owners have rushed to complete before the new stamp duty rate is introduced in April.”
Richard Pike, Phoebus Software sales and marketing director, added:
“Seeing the breakdown of lending in January has thrown up some interesting details. The fear that the Chancellor’s focus on cooling the buy-to-let market would have the opposite effect were borne out in the last quarter of 2015. In January though there was a shift in lending to BTL remortgaging as landlords look for ways to raise capital to increase portfolios ahead of the stamp duty changes. We will no doubt see further growth when the figures for February and March come out, but it is likely to be in the purchase realm.
“The aim of the government in trying to cool buy-to-let was to enable more first time buyers to get onto the ladder and away from rented accommodation. However, it appears that the rush for buy-to-let is pushing prices up and making it more difficult for FTBs rather than easier.”