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Total mortgage lending in UK still affected by weakness in buy to let

March 23, 2017

Total mortgage lending in UK still affected by weakness in buy to let

Gross mortgage lending in the UK reached £18.2 billion in February, down 8% on January’s lending total of £19.8 billion but not far from the £18.1 billion lent in February last year.

The figures from the latest market report from the Council of Mortgage Lenders, which represents the vast majority of home lenders in the country, suggest that current weaknesses are likely to continue.

‘Mortgage lending is holding up well, but under the surface buyers face mixed fortunes. First time buyers and customers who are remortgaging are driving total lending, while home movers and buy to let remain weak,’ said CML senior economist Mohammad Jamei.

‘The weakness in home movers means few properties are coming onto the market for sale, which is aggravating a supply demand imbalance that has characterised the market since late 2013. This looks set to continue at least over the next few months, posing an obstacle for would-be borrowers,’ he added.

Henry Woodcock, principal mortgage consultant at IRESS, expects the market to pick up a bit in March, traditionally the start of the busy spring buying season. ‘There was no stimulus to housing provided in the Spring Budget, and forecasts by estate agents indicate that the number of home transactions completed will fall % this year,’ he said.

‘However, I still expect March gross lending to be slightly higher than February, although it will not reach the heady height of 2016 which was driven to a great extent by impending buy to let changes,’ he explained.

‘Of course, one thing could change this. The recent jump in inflation to 2.3% is the first above target rise since November 2013. No doubt this will put some pressure on the Bank of England’s Monetary Policy Committee (MPC) to start considering interest rate rises,’ he pointed out.

‘If that were to happen it would obviously mean higher monthly payments for people on tracker and variable mortgages, and lenders would react quickly to pull some of the very cheap mortgage deals. It wouldn’t surprise me if we see an unusually higher spike in mortgage activity over the coming months as people look to secure the best deals while they’re still available,’ he added.

John Eastgate, sales and marketing director of OneSavings Bank, pointed out that a nine year high for gross mortgage lending in January proved that mortgage demand is effervescent. ‘But given the record highs, some moderation was to be expected and is arguably welcomed. The Brexit effect and the base rate cut have driven mortgage rates to all-time lows, supporting mortgage activity, most prominently in remortgaging,’ he said.

‘While buy to let purchases have seen a dip since the changes to stamp duty costs last year, the sector has also seen a surge in demand from landlords refinancing to take advantage of low rates to reduce their costs. We should expect to see remortgage activity continue to drive lending levels in 2017 as a lack of supply and stretched affordability, will continue to subdue the purchase market,’ he added.