Mortgage lending rebounds thanks to first-time buyers, CML says

UK mortgage lending rebounded strongly in August, according to lenders, though this runs counter to other recent housing market data.

Data from the Council for Mortgage Lenders (CML) showed £12.2bn of mortgage advances for house purchase in August, an increase of 14% on the preceding month and 11% on August last year.

This followed the marked dip in July, which CML director general Paul Smee said reflected resilience in first-time buyer activity.

Ahead of the end of the government’s Help To Buy mortgage guarantee scheme in December, first-time buyers borrowed 13% more month-on-month (MoM) and 24% year-on-year (YoY), home movers borrowed 15% MoM and 3% more YoY, while remortgages declined 2% MoM but were up 41% on last year.

"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 home-ownership over the coming months," Smee said.

“Buy-to-let by contrast continues to operate at lower levels five months after the stamp duty change on second properties. This appears to be a long-term trend, and with lenders potentially tightening affordability checks ahead of the tax changes in April 2017, activity on the buy-to-let house purchase side may well remain at current levels."

Economist Howard Archer at IHS Markit pointed out that the CML data contrasted with other recent data that indicated softer housing market activity, namely Bank of England reports that mortgage approvals for house purchases, which occur earlier in the buying process than advances so are more of a current indicator, slowed to a 21-month low in August, while the surveying industry reported buyer enquiries fell for a fifth month running in August.

"The August CML data do little to change our view that house prices will be essentially flat over the final months of 2016," Archer said.

"Relatively limited housing market activity is likely to limit house prices, but we suspect that the current resilience of the economy and a shortage of properties will prevent prices from falling over the final months of 2016. We believe that a slight dip in house prices is likely in 2017, possibly by around 3%."