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Buying activity contrasts with subdued remortgaging market

News

Published: 23 September 2014 | Author: Bernard Clarke

First-time buyers, movers and buy-to-let investors contributed to robust borrowing activity last month as gross mortgage advances reached an estimated £18.6 billion – the highest total for August since 2008.

Our estimate was 5% lower than Bank of England reported gross lending of £19.7 billion for the preceding month, but July’s total was the strongest in six years. August’s estimated lending was 13% higher than the same month last year (£16.4 billion). Our market commentary attributed this summer’s data to strong seasonal factors.

Chart One: UK property transactions, 12-month moving totals

Market commentary Sep 2014 trans

Source: CML Regulated Mortgage Survey and CML estimates

Looking ahead, a gentle softening of lending activity may now be in prospect, given the continuing impact of tighter lending rules and an easing of conditions in the London market.

Official figures indicate that Help to Buy is making a modest contribution to activity, accounting for around 10% of mortgage transactions in recent months. Help to Buy appears well-targeted, with the majority of transactions being for moderately-priced properties, purchased by first-time buyers and away from London.

Lending for house purchase contrasts strongly with remortgaging activity. After languishing at 15-year lows, remortgaging showed signs of recovery during much of 2013 and earlier this year. More recently, however, appetite appears to have fallen away again, with remortgaging in July weaker than a year ago. It now looks set to remain subdued until concerns about an imminent rate rise provide an incentive for borrowers to switch.