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UK mortgage market returns from surge

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House purchase lending in the UK fell in April from the record highs observed in March, caused by the pending introduction of new legislation.

The stamp duty change introduced on second properties that came into effect in April resulted in activity across the market being brought forward into March, which had a subsequent effect on April’s lending figures, leading to a slowdown.

Consequently, house purchase activity experienced a sharp fall month on month, but this was mainly observed in the buy to let market.

Overall, £8.1 billion was borrowed towards house purchases, which represented a 40 per cent month-on-month fall, yet just a four per cent year-on-year decrease when measured against April 2015. In total buyers took out 47,300 loans, down 31 per cent on March and five per cent on April 2015.

FTBs buck the trend

First-time buyer activity bucked the trend, with the amount borrowed standing at £3.9 billion - 11 per cent down on the figure recorded in March but up 15 per cent on April last year, with 25,100 loans taken out in total, representing a seven per cent annual rise.

Existing homeowners borrowed £4.3 billion, which is down 53 per cent on March, as expected, and 14 per cent compared to a year ago. 

Remortgage activity increased significantly in April as homeowners opted to take advantage of the introduction of new rates and deals. Lending totalled £6 billion, which was up 25 per cent on March and by 40 per cent in comparison to April 2015, with a total of 34,800 loans.

Paul Smee, director general of the CML, said there was a sense of “calm after the storm” in April as lending eased back.

“It followed the significant rises in activity in March as borrowers looked to beat the second property stamp duty deadline. We expect the market to take several months to return to its previous levels after the lending surge.

Affordability remains stable

Despite the fluctuations in activity, affordability metrics for first-time buyers have remained relatively stable, with the typical loan size decreasing to £129,950 in April from £133,000 in March. This was offset by the household income of borrowers also decreasing slightly from £40,600 in March to £39,700 in April.

Home movers showed a similar trend, with the average amount borrowed decreasing to £163,000 from £180,000 in March, and the average household income of a home mover also falling from £58,400 to £52,500.

Remortgage lending was the only lending type to show both month-on-month and year-on-year increases in April, with the highest volume of loans for remortgage in a month since July 2009, and the highest lending value for remortgage since January 2009. 

It comes after the latest Halifax House Price Index revealed that the average cost of a UK home increased slightly last month, despite forecasts of a marginal reduction.

The monthly report from the UK’s largest mortgage lender showed that house prices rose by 0.6 per cent, which was double the rate forecast in a Reuters poll of economists and a reversal of the 0.8 per cent monthly drop recorded the month before.


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