The CML said first-time buyers are close to overtaking levels of home movers for the first time in over 20 years.
It estimates that gross mortgage lending reached £21.4bn in March. This is 19% higher than February’s lending total of £17.9bn, and 19% lower than the £26.3bn spike ahead of the Stamp Duty hike lent in March last year.
Gross mortgage lending for the first quarter of 2017 was therefore an estimated £59.1bn. This is 4% down on the fourth quarter of last year and a 6% decrease on the £63.0bn lent in the first quarter of 2016.
House purchase approvals have averaged 68,000 monthly over the last five months, around 3,000 less per month that the same period a year ago.
The MPC expects to see an average monthly total of 71,000 house purchase approvals over the next six months. However, the CML said it is less optimistic, given that house purchase activity is currently driven mainly by first-time buyers, and other parts of the market remain weak.
CML senior economist Mohammad Jamei said: “Mortgage lending appears to be in neutral gear. Our gross estimate for March is £21.4bn and this is broadly in line with average monthly lending over the past year. Within this aggregate level, there has been a shift towards first-time buyer and remortgage customers, away from home movers and buy-to-let landlords.
“We expect this profile to continue over the short-term, as low mortgage rates encourage existing borrowers to remortgage and government schemes help first-time buyers. We do not expect any marked effect from the General Election.”
The CML said that the average mortgage rates on offer are the lowest since records began. This will encourage more existing borrowers to remortgage. First-time buyers are also being helped by government schemes, on top of credit availability and low mortgage rates. On a 12-month rolling basis, there were 342,000 first-time buyers, the highest in nine years.
This is in comparison to movers, who have benefited much less from government help and are subdued in numbers. The CML predicts that first-time buyer numbers may exceed movers over the next few months – the first time this happened since 1996 (see graph). It has commissioned research to look into the reasons for the low housing market turnover.
Buy-to-let activity has suffered a massive drop a year on from the Stamp Duty change on second properties. If March lending data shows activity in this space similar to the last few months, there will have been around 70,000 buy-to-let house purchases in the last year. This compares to 142,000 in the 12 months leading up to the Stamp Duty change – a 42% reduction year-on-year.
Jeremy Duncombe, director of the Legal & General Mortgage Club, said the figures reflect a market “hamstrung by a severe shortage of affordable homes”.
“Until we address this issue head on, it will continue to exclude many hopeful first time buyers and home movers. It is important that the government remains focused on delivering the promises that were pledged in the Housing White Paper,” he said.
“We need to reconsider our approach to Stamp Duty and green belt land, which are both archaic and desperately need re-evaluating. In doing so, these changes will help the government achieve its ambitious aim of building one million affordable homes by 2020.”