According to data from the Council of Mortgage Lenders (CML), borrowers took out more loans to purchase a home in January and February than in any year since 2007.
CML director general Paul Smee (pictured) said: “Seasonal factors traditionally keep the market quieter in winter months, but 2017 began relatively strongly on the house purchase side.
“This is down to strong first-time buyer activity which has consistently matched home mover borrowing over the past six months, a trend not seen in the UK for 20 years.
“House purchase activity on the buy-to-let lending side remains weak. This trend is expected to continue because of the tax changes from April and because lenders are tightening affordability criteria in response to PRA-mandated stress tests.”
Affordability worsened slightly for first-time buyers.
Despite a slight decrease in the typical first-time buyer loan size from £132,300 in January to £132,100 in February, the average household income also decreased to £40,000 from £40,200.
This meant the income multiple went from 3.53 to 3.54, up from 3.46 in February 2016.
For homemovers, affordability was unchanged with an average income multiple of 3.34 as the amount borrowed and household income both increased slightly.
Buy-to-let activity was driven by remortgage lending which accounted for over two thirds of the sector’s lending.
The number of loans for buy-to-let house purchases advanced in February was also at a ten-month low, in part due to the traditional seasonal dip in activity in the winter months.
House price slowdown
Trussle CEO and founder Ishaan Malhi noted that a surge in first-time buyer activity would be fuelled by many looking to take advantage of the momentary slowdown in house price growth.
He added: “It seems that many existing borrowers are taking advantage of low interest rates to secure a better deal on their repayments – a saving that could make a real difference to households at a time of low wage growth and rising inflation.
“Until the Bank of England does finally announce a rate rise, I expect to see remortgaging levels continue to rise year-on-year.”
However, Hope Capital CEO Jonathan Sealey said: “It is clear that affordability is still very much an issue and one that isn’t going away anytime soon, with a third of first-time buyers now spending half a decade saving for their first home.
“However, strong first-time buyer activity and the lull in buy-to-let house purchase is likely to continue in 2017 as more lenders tighten their affordability criteria ahead of the PRA mandated stress tests.”