While lending is up year on year across the board, buy-to-let loans for house purchase showed stronger growth by value than remortgage loans for most of the year, with an increase of 36%.
“The stand-out trend in this latest mortgage data is the strength of the buy-to-let market”, said Myles Williams, chief executive at Fast Property Finance. “Buy-to-let has really come into its own in recent years and is being driven by people’s understanding that house price levels and supply problems are creating a significant investment opportunity.”
“The relaxation of the pension rules and economic turbulence around the world have also resulted in greater demand for buy-to-let”, he continued, adding that buy-to-let is an asset class people in the UK feels “protects them in a way that equity-based investment never could.”
Paul Smee (pictured), director general of the CML said: “Buy-to-let continues its growth this period, but at 18% of new lending in September remains the fourth largest lending type behind first-time buyers, home movers and re-mortgage. There were five times as many house purchase loans to home-owners as buy-to-let landlords in September, and the growth in buy-to-let lending largely continues to reflect its more belated recovery from recession.”
From 2007 to 2009, buy-to-let loans for house purchase declined 71% in volume terms , compared to 50% for loans to home-owners for house purchase in the same period.
The number of first-time buyer loans advanced and amounts borrowed have also increased, with values reaching £4.3bn, up 10% year-on-year.
Mark Harris, chief executive of mortgage broker SPF Private Clients said: “The number of first-time buyers continues to grow, as they take advantage of the plethora of high loan-to-value (LTV) deals available. However, a fall in pricing means that first-time buyers are not overstretching themselves as they are paying a record low proportion of their monthly household income to service their mortgages.”
The proportion of income paid by first-time buyers was 18.3% in September, the equal lowest monthly level, with June 2015, since the CML began tracking this metric in 2005.
Home mover lending saw a similar increase as first-time buyers but the percentage increases by volume and by value were higher, with a year-on-year value increase of 15%, up to £6.8bn.
In the third quarter, the value of home-owner loans for house purchase accounted for 57% of gross lending, while re-mortgage activity accounted for 24%. Home movers spent 18.1% as a proportion of their income to pay capital and interest repayments, a decrease from 18.8% in the third quarter last year.
“Excellent mortgage rates continue to attract home movers and remortgagors, with Precise, TSB and Accord just three of the lenders cutting rates in the past week. With Leeds Building Society increasing its maximum LTV on new build by 5% to 90% on houses and 85% on flats, lenders are demonstrating a keenness to lend which is good news for anyone looking for a mortgage over the next few months”, said Harris.
Smee agrees: “The market was a slow starter this year, but this quarter shows it is now firmly on an upward trajectory. With competitive rates and high levels of product choice currently available, alongside generally improving economic conditions, we expect this to continue as we head into the new year.”
“Overall, the picture emerging from this data is one of a property market where demand is strong across the board. If only the same could be said of supply”, said Williams.
