Mortgage lending did nothing for the subdued housing market

Mortgage lending

Mortgage lending did nothing for the subdued housing market

Mortgage lending – Remortgage activity picked up in May and has helped drive lending, alongside first-time buyers but the housing market has stalled, as activity has been subdued for the past few months.

MPC said it expected to see 71,000 house purchase approvals a month for the rest of the year but approvals have fallen from 69,000 in January to 65,000 in April, and house purchase activity has been driven predominantly by first-time buyers.

The Council of Mortgage Lenders reported that while first-time buyers have recovered slowly, home movers have been falling. In the 12 months to April, first-time buyers were up 8% compared with the 12 months before that but movers were down 9%.

Despite all this, lending continues to be stable and was estimated to be £20.9 billion in May, on a seasonally adjusted basis. On an unadjusted basis, lending was £20.1 billion.

According to the Council of Mortgage Lenders, it’s likely that remortgage activity has helped drive lending, alongside first-time buyers, as has been the case over the last year.

Looking ahead, the Council expects to see this trend continue, but not as strongly, as the factors supporting lending are blunted somewhat by less favourable economic conditions.

Mortgage rates are still close to historic lows, but the Council of Mortgage Lenders see little scope for further improvement with recent data showing a slight increase in mortgage rates on offer.

Buy-to-let has seen a larger fall over the last year. Buy-to-let house purchase activity is nearly half what it was a year ago, and has averaged around 6,000 purchases a month over the last 12 months.

The low number of home movers naturally limits the number of properties that come up for sale. The council warns that this can dampen activity further, if would-be movers/first-time buyers don’t find properties they would like to move to.

Supply of new homes has picked up in England recently, as data from the Department for Communities and Local Government shows a 20% increasing in completions in the first three months of 2017 compared to a year earlier. The issue is that new supply accounts for around one in 10 transactions, so while it is positive news, it will do little to reverse the current situation.