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UK house purchase lending up 21%

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House purchase lending in the UK has increased considerably over the past year, according to the latest figures from the Council of Mortgage Lenders.

Between February 2015 and February 2016, homeowners borrowed £8.7 billion to buy new homes, which represents a 21 per cent annual increase.

Overall, borrowers took out 48,000 loans, which was up 12 per cent on the figure recorded a year earlier and also represented a four per cent monthly increase.

Significant activity was seen in the first-time buyer market, with FTB borrowing standing at £3.4 billion; up 21 per cent on February last year and three per cent from the previous month. The FTB total stood at 22,000 loans, which is up three per cent month-on-month and 11 per cent year-on-year. 

Borrowing for existing homeowners stood at £5.3 billion, which is up 20 per cent compared to a year ago and a four per cent rise on the figure reported in January. This total stood at 26,000 loans, which is up four per cent month-on-month and 14 per cent on February 2015.

While traditionally there is lower activity in the winter months compared to other seasons, February 2016 saw the most amount borrowed for house purchase by existing homeowners in the month of February since 2007.

The CML’s affordability metrics for first-time buyers have remained relatively unchanged month-on-month, but the amount of monthly gross income that borrowers are allocating to service capital and interest repayments stood at 18.1 per cent, which is the lowest proportion since records began in 2005.

Paul Smee, director general of the CML, said that in 2016 there have been “substantial increases” in house purchase and remortgage activity, which perhaps reflects the “sluggish market” in early 2015, driven by election uncertainties

The report was supplemented by new figures in the Bank of England’s Credit Conditions Survey, which found that demand for mortgages from home buyers increased in the first quarter of 2016.

The report indicated that overall demand is expected to increase slightly in the next three months as increasing confidence in the market feeds into home buyer activity.