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Jason Tebb

Jason Tebb is the founder of Ivy Gate. He regularly comments on the UK and International property market on multiple media channels.
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MORTGAGE COSTS REACH HISTORIC LOW POINT IN SEPTEMBER

On an unadjusted basis, in September:

  • Home-owners borrowed £11.4bn for house purchase, down 7% month-on-month but up 4% year-on-year. They took out 62,900 loans, down 5% on August but up 3% on September 2015.
  • First-time buyers borrowed £4.9bn, down 4% on August but up 14% on September last year. This equated to 31,500 loans, down 1% month-on-month but up 13% year-on-year. 
  • Home movers borrowed £6.5bn, down 9% on a month ago and 3% compared to a year ago. This represented 31,400 loans, down 8% month-on-month and 5% on September 2015.
  • Remortgage activity totalled £5.5bn, down 7% on August but up 8% compared to a year ago. This came to 31,500 loans, down 10% month-on-month but up 2% compared to a year ago.
  • Landlords borrowed £2.8bn, down 7% month-on-month and 22% year-on-year. This came to 18,200 loans in total, down 6% compared to August and 26% compared to September 2015.

On an unadjusted basis, in the third quarter:

  • Home-owners borrowed £34.3bn for house purchase, up 16% quarter-on-quarter and 1% year-on-year. They took out 187,200 loans, up 12% on the second quarter but down 1% on the third quarter 2015.
  • First-time buyers borrowed £14.5bn, up 8% on the second quarter and 12% on the third quarter last year. This equated to 91,600 loans, up 7% quarter-on-quarter and 8% year-on-year. 
  • Home movers borrowed £19.8bn, up 22% on the last quarter but down 6% compared to a year ago. This represented 95,600 loans, up 17% quarter-on-quarter but down 8% on the same quarter in 2015.
  • Remortgage activity totalled £17.5bn, up 5% on the second quarter and 22% on the same quarter a year ago. This came to 100,100 loans, up 3% quarter-on-quarter and 16% compared to a year ago.
  • Landlords borrowed £8.8bn, up 10% quarter-on-quarter but down 19% year-on-year. This came to 56,200 loans in total, up 9% compared to the second quarter but down 24% compared to the third quarter in 2015.

The CML now publishes seasonally adjusted monthly data (see attached) alongside the normal unadjusted data. This makes it easier to spot underlying trends.

Paul Smee, director general of the CML, commented:

“House purchase activity appears to have steadied, we may not be seeing huge increases in activity on the scale of 2013-14 but there is a consistency in the levels in recent months. Mortgage affordability reached an historic low in September, for both first-time buyers and home movers, which partly reflects the re-pricing of mortgages following August’s base rate cut. This should help turn strong appetite for home-ownership into a reality as we approach the closing months of the year.  

“Six months on since the stamp duty changes on second properties and buy-to-let continues to operate at lower levels than a year ago. But lending for buy-to-let house purchase and remortgaging has settled at its current level over the last four months.”

Home-owner house purchase lending

The amount borrowers are paying as a percentage of their household income to service capital and interest rates reached a historic low this month for both first-time buyers and home movers, 17.8% and 17.7% respectively.

Affordability metrics for first-time buyers saw the typical loan size decrease to £133,000 in September from £136,400 in August. The average household income also decreased slightly from £41,000 in August to £40,200 in September. This meant the income multiple was slightly down from 3.56 to 3.53.

The average amount borrowed by home movers in the UK also decreased to £171,000 in September from £175,000 in August, while the average home mover household income also decreased to £55,100 from £55,400. The income multiple for the average home mover went from 3.27 to 3.26 month-on-month.

While there was a decline in house purchase lending in September compared to a month before, this is the highest volume of loans and most amount borrowed in the month of September since September 2007.This was mirrored in first-time buyer trends as this was the highest volume of loans in the month of September since September 2006.

On a seasonally adjusted basis, most lending trends were relatively similar. However, first-time buyer loans by value increased both month-on-month and year-on-year. Home movers saw an increase by value compared to August.

Remortgage loans saw a decline month-on-month but an increase year-on-year in September. On a quarterly basis, there were more loans advanced for remortgage than any quarter since the third quarter of 2011.

Chart 1: Number of loans to home-owners, 2007-2016

Source: CML Regulated Mortgage Survey 

Buy-to-let lending in September

Gross buy-to-let lending declined in September compared to August and remained down on year earlier levels but, on a quarterly basis, lending went up in the third quarter compared to the second quarter. Nearly two thirds of buy-to-let loans were remortgages rather than house purchase.

Chart 2: Number of loans for buy-to-let, 2007-2016

Source: CML Economics (pre-2013 data based on quarterly data)

Table 1: Number of loans for house purchase and remortgage in September

 

House purchase

Remortgage

 

FTBs

Movers

Buy-to-let

Home owners

Buy-to-let

September 2015

28,000

33,100

11,100

30,800

12,500

August 2016

31,800

34,200

6,500

35,000

12,800

September 2016

31,500

31,400

6,400

31,500

11,500

1 month change

-0.9%

-8.2%

-1.5%

-10.0%

-10.2%

12 month change

+12.5%

-5.1%

-42.3%

+2.3%

-8.0%

Table 2: Number of loans for house purchase and remortgage in the third quarter

 

House purchase

Remortgage

 

FTBs

Movers

Buy-to-let

Home owners

Buy-to-let

Q3 2015

84,600

103,800

33,500

86,200

37,200

Q2 2016

86,000

81,500

14,700

97,600

35,900

Q3 2016

91,600

95,600

18,900

100,100

36,600

1 quarter change

+6.5%

+17.3%

+28.6%

+2.6%

+1.9%

1 year change

+8.3%

-7.9%

-43.6%

+16.1%

-1.6%

Table 3: Value of loans for house purchase and remortgage in September

 

House purchase (£m)

Remortgage (£m)

 

FTBs

Movers

Buy-to-let

Home owners

Buy-to-let

September 2015

4,300

6,700

1,500

5,100

2,100

August 2016

5,100

7,100

1,000

5,900

2,000

September 2016

4,900

6,500

900

5,500

1,900

1 month change

-3.9%

-8.5%

-10.0%

-6.8%

-5.0%

12 month change

+14.0%

-3.0%

-40.0%

+7.8%

-9.5%

Table 4: Value of loans for house purchase and remortgage in the third quarter

 

House purchase (£m)

Remortgage (£m)

 

FTBs

Movers

Buy-to-let

Home owners

Buy-to-let

Q3 2015

13,000

21,000

4,500

14,300

6,200

Q2 2016

13,400

16,200

2,100

16,700

5,800

Q3 2016

14,500

19,800

2,800

17,500

6,000

1 quarter change

+8.2%

+22.2%

+33.3%

+4.8%

+3.4%

1 year change

+11.5%

-5.7%

-37.8%

+22.4%

-3.2%

 mortgage-affordability ftb

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