Mortgage lending slows but remortgages surge

Mortgage borrowing fell 25% month-on-month in January, according to data from lenders, though remortgaging rose 35% compared to December.

Figures compiled by the Council of Mortgage Lenders showed £8.4bn of borrowing for house purchases in the month, which was down versus the previous month but up 12% year-on-year.

By volume, there was a 27% monthly decline to 21,400 loans, but up 5% on the year before.

CML bank and building society members, who carry around 95% of mortgage lending in the UK, lent £5.8bn in 33,100 loans to remortgagors, up 35% on December and up 32% compared to a year ago.

The buy-to-let market saw 9% month-on-month growth and 42% year-on-year to £3.7bn

After introducing seasonally adjusted figures for the first time, CML director general Paul Smee said: "While the unadjusted data appears to show large falls in January compared to December, stripping out the usual January lull we see a general picture of flat house purchase lending but a significant uptick in remortgage activity, as borrowers continue to seek attractive new deals despite the lower-for-longer expectations for interest rates.”

Jeremy Leaf, former chairman of the Royal Institution for Chartered Surveyors and still an active estate agent, said the CML figures provided the market with a taste of what is to come in the housing market over coming months.

"What we are seeing on the ground is people taking advantage of mortgage rates while they are low. With a relatively low number of transactions taking place, lenders are having to make up their numbers somewhere and are offering a plethora of attractive remortgage deals.

"There is already a softening in house prices as investors have brought forward their buying decisions from the second quarter of the year to the first quarter. It remains to be seen after the EU referendum whether they will shake off the concerns they have about the market in the third quarter."

Leaf felt it was likely that developers who fail to sell new-build flats quickly enough will have "no choice" but to sell at a discount in order to fund future developments.