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UK house purchase lending on the rise

Mortgage rise3

UK house purchase lending was 11 per cent higher in August than the same time last year as buyers sought to take out new mortgages, the latest figures reveal.

Data published by the Council of Mortgage Lenders (CML) shows that £12.2 billion was borrowed for house purchases in August 2016, which is up by 14 per cent on the previous month and 11 per cent on a year ago.

In total, new home buyers took out 66,000 loans, which is up 13 per cent on July’s figures and a nine per cent rise when compared to the same time last year.

FTB activity

First-time buyers (FTBs) proved particularly active in August, borrowing £5.1 billion, which is up by 13 per cent on a monthly basis and a significant 24 per cent rise on August last year, with the 31,800 loans taken out representing a 19 per cent yearly increase.

The monthly number of FTBs in August was the second highest of 2016, while affordability metrics for first-time buyers have remained relatively stable, with the typical loan size increasing to £136,300 in August from £133,000 in July as average household income rose from £40,200 to £40,900 over the same period.

Activity was also strong among existing homeowners, who borrowed £7.1 billion in August; up 15 per cent on July and three per cent compared to a year ago, with the 34,200 loans being 14 per cent higher on a monthly basis.

The amount borrowed by home movers was also the second highest monthly figure of 2016, and the highest August level since 2013, with the average amount borrowed by existing homeowners in the UK increasing to £175,000 in August from £172,000 in July.

Demonstrating strength

Paul Smee, director general of the CML, noted that house purchase activity “bounced back” from its slight dip in July following the immediate uncertainty in the wake of the Brexit vote, reflecting resilience in FTB activity. 

According to the CML, a key factor in the increase in activity and ongoing upturn has been the wide range of mortgages available, including some record-breaking offers on fixed rate deals.

Mr Smee added: “Mortgage rates remain at or close to historic lows, and the re-pricing of mortgages following August’s base rate cut should help to underpin a continuing, strong appetite for homeownership over the coming months.”

After the Bank of England made its historic announcement in the summer, many mortgage lenders moved to reduce the rates on tracker mortgages immediately, with customers on some standard variable rate deals also benefiting from reductions in repayments.

This could be affected further still by additional easing by the BoE’s Monetary Policy Committee in November, which has been widely projected by economists and also suggested by the Bank’s governor, Mark Carney.

Use our mortgage calculator, created with the Mortgage Advice Bureau, to work out the best deal for you.


FTB affordability